GIFT   OF 
Mrs.   Berton  Einstein 


NOTES    AND    ANNOTATIONS    TO    "THE    LAW'  OF    DEPOSITS,"     BY 
FRED  W.   WE1TZEL,  FOR  USE  IN  THE  STATE  OF  CALIFORNIA. 

NOTE. — Heavy  numbers   refer  to  section   numbers  of  text. 

CHAP.  1.  3.  92  Cal.,  14;  and  this  applies  to  deposits  in  savings  banks. 
117  Cal.,  161.  4.  Where  trust  company  is  itself  the  trustee,  administrator, 
etc.,  the  moneys  so  held  by  it  are  trust  funds  and  out  of  the  trust  funds 
claims  as  such  must  be  paid  first;  and  where  deposit  is  made  by  an  officer 
appointed  by  the  court,  by  direction  of  the  court,  such  deposit  is  preferred; 
otherwise  the  rules  as  stated  in  text  apply.  7.  Purchaser  of  draft  who  pays 
for  it  by  check  on  his  account  remains  a  depositor  in  case  draft  is  not  paid. 
124  Cal.,  90.  12.  But  where  it  is  merely  a  receipt  for  money  deposited  to  be 
held  and  the  identical  money  returned,  it  can  be  recovered  in  full,  though 
wrongfully  mingled.  112  Cal.,  598.  In  this  case  there  was  no  proof  that 
the  money,  or  an  equivalent  amount,  did  not  remain  in  bank. 

CHAP.  11.  25.  No  bank  can  deposit  any  of  its  funds  in  another  bank 
unless  such  other  bank  has  been  designated  a  depositary,  by  vote  of  majority 
of  directors  or  trustees  of  depositing  bank,  exclusive  of  the  vote  of  any  director 
or  trustee  who  is  also  an  officer,  director  or  trustee  of  the  depositary  desig- 
nated. See  note  51.  - 

27.  Public  moneys  of  the  State.  Bids  are  received  and  from  the  banks 
agreeing  to  pay  highest  rate -of  interest  the  State  Treasurer,  with  the  approval 
of  the  Governor  and  the  State  Comptroller,  selects  depositaries  of  public 
funds.  National  banks  or  banks  organized  under  the  laws  of  California  may 
be  selected.  Not  more  than  10  per  cent  of  the  aggregate  amount  of  State 
money,  and  not  more  than  an  amount  equal  to  25  per  cent  of  the  paid 
up'  capital  of  the  bank,  exclusive  of  reserve  and  surplus,  can  be  deposited  in 
any  one  bank.  The  interest,  paid  or  credited  on  the  first  day  of  each  manth, 
belongs  to  the  State.  Value  of  security  deposited  must  be  at  least  10  per 
cent  in  excess  of  the  amount  deposited,  and  must  be  approved  by  the 
Governor  and  the  State  Comptroller.  An  indemnity  bond  may  also  be  re- 
quired. Deposits  must  be  payable  on  demand  or  on  return  of  certificate  of 
deposit  properly  endorsed. 

County  and  Municipal  Moneys.  May  be  deposited  in  licensed  national, 
or  in  state  bank  or  corporation  licensed  to  do  a  banking  business  and  organized 
under  the  laws  of  California.  Deposit  in  no  bank  can  exceed  50  per  cent 
of  its  capital.  Not  more  than  10  per  cent  of  all  moneys  in  his  control  can 
be  deposited  by  officer  in  any  one  bank  while  other  qualified  banks  request 
deposits.  However,  no  deposit  need  be  made  outside  of  county  owning  the 
money  or  outside  of  county  where  municipality  is  located.  The  rate  of 
interest  is  fixed  annually,  in  January,  for  the  year,  by  the  Treasurer,  Auditor 
and  chairman  of  the  Board  of  Supervisors  of  the  County,  in  the  case  of 
county  funds,  and  by  the  Treasurer,  Auditor  (or,  if  no  auditor,  the  clerk) 
and  chairman  of  the  council  or  other  governing  board,  in  the  case  of 
municipal  funds.  The  rate  must  be  uniform  as  to  all  deposits  of  a  county 
or  city.  The  interest  belongs  to  the  county,  or  city,  and  must  be  paid  quar- 
terly. Securities  must  be  approved  by  officer  depositing  and  by  the  attorney 
for  the  county  or  city,  respectively. 

Generally. — Securities  must  consist  of  United  States  bonds,  or  bonds 
of  the  State,  or  of  counties,  municipalities  or  school  districts  in  California. 
Interest  must  be  at  least  2  per  cent  and  calculated  on  daily  balances.  All 
deposits  are  subject  to  payment  on  demand  of  the  officer  depositing  or  his 
successor.  In  the  case  of  county  and  municipal  money  the  bank  can  return 
the  deposit,  with  interest  to  date  of  return,  at  any  time,  and  withdraw  its 
securities.  While  remaining  on  deposit  in  accordance  with  law  (and  in 
the  case  of  State  funds,  with  the  consent  of  the  Governor  and  State  Comp- 
troller) the  officer  is  relieved  from  further  responsibility.  The  officer  de- 
positing the  funds  is  responsible  for  the  safe  return  and  disbursement  of 
securities  or  their  proceeds,  and  the  State,  counties  and  cities,  respectively, 
are  liable  to  the  banks  for  securities  deposited  with  such  officers.  The  banks 
must  pay  all  expenses  of  transporting  funds  to  and  from  the  depositary. 

Making  a  profit  out  of  public  moneys,  or  using  them  for  unauthorized 
purpose  is  felony  on  part  of  public  officer;  wrongful  receipt  subjects  bank 
to  a  fine  and  bank  officer  receiving  is  guilty  of  a  felony.  Act  of  March  23, 

36.  Where  deposit  is  made  as  "Agent,"  for  a  disclosed  principal,  bank 
cannot  assume  that  principal  is  fictitious;  and  if  it  pays  to  the  agent  it  does 
so  at  its  peril.  73  Cal.,  464.  Bank  can  not  issue  to  A  a  certificate  of  deposit 
for  money  which  it  knows  belongs  to  A's  wife;  and  payment  of  the  certificate 
to  the  husband  does  not  discharge  liability  of  bank  to  wife.  136  Cal.,  499. 

CHAP.  III.  37.  Depositor  who  delivers  money  at  counter  in  savings 
bank  not  required  to  ascertain  whether  directors  have  expressly  authorized 
receipt  by  the  one  taking  same.  136  Cal.,  499.  38b.  Pass  book  not  negoti- 
able 43  Cal.,  325.  Garnishee  bank  cannot  set  up  that  its  pass  books  are 
tran'sferrable.  Same  case.  38d.  92  Cal.,  14,  holds  that  negligence  of  depos- 
itor alone  does  not  relieve  bank  from  liability,  where  bank  has  not  been 
deprived  of  opportunity  to  save  itself.  39.  122  Cal.,  19;  2  Cal.  App.,  377; 
131  Cal  ,  321.  39a.  In  California  statute  provides  that  "Whenever  any 
deposit  with  a  bank  shall  be  made  by  any  person,  in  trust  for  another,  and 


no  other  or  further  notice  of  the  existence  and  terms  of  a  regular  and  valid 
trust  shall  have  been  given,  in  writing,  to  such  bank,  in  the  event  of  the  death 
of  the  trustee,  the  same,  or  any  part  thereof,  together  with  the  dividends 
or  interest,  if  any,  thereon,  may  be  paid  to  .the  person  for  whom  the  dep'osit 
was  made."  39b.'  Bank  must  pay  check  though  it  knows  the  check  was  drawn 
in  payment  of  wager.  96  Cal.,  197.  41.  But  a  certificate  is  assignable, 
though  not  negotiable.  101  Pac.,  34,  even  where  certificate  states:  "not 
transferable."  42.  Bank  has  authority  to  issue  certificates  of  deposit,  though 
not  authorized  to  issue  promissory,  notes.  136  Cal.,  510. 

45.  Where  A  deposits  money  and  takes  certificate  in  B's  name,  A  can 
not  withdraw  the  money  without  B's  endorsement.  73  Cal.,  464. 

49.  Mo  interest  unless  stipulated.  130  Cal.,  542.  50.  See  130  Cal., 
542,  where  certificate  to  stockholders,  for  money  loaned  the  bank,  was  held 
to  create  relation  of  depositor  to  bank.  51.  President  or  managing  officer  of 
every  bank  must,  within  15  days  after  the  first  day  of  January  of  every  odd- 
numbered  year,  return  to  Superintendent  of  Banks  a  statement  showing  names 
of  depositors  known  to  be  dead,  or  who  have  not  made  further  deposits,  or 
withdrawn  moneys,  during  the  preceding  ten  years. 

Reserve.  Every  bank  (every  person,  firm,  company,  partnership  or  cor- 
poration which  receives  money  on  deposit)  except  savings  banks,  must  at  all 
times  have,  in  lawful  money  of  the  United  States,  gold  and  silver  coin,  gold 
certificates  or  silver  certificates,  an  amount  equal  to  15  per  cent  of  its  aggre- 
gate deposits,  exclusive  of'  state,  county  and  municipal  deposits.  Three-fifths 
of  this  may  consist  of  deposits  in  banks  in  California,  other  than  savings 
banks,  subject  to  call.  Bank  receiving  deposits  of  other  banks  must  maintain  a 
reserve  of  at  least  20  per  cent  of  its  aggregate  deposits  exclusive  of  public 
deposits  mentioned.  As  with  a  national  bank,  no  dividends  can  be  paid  and 
no  new  loans  or  discounts  made,  other  than  the  discounting  of  bills  of  ex- 
change payable  at  sight,  when  reserve  is  below  the  minimum.  Failure  to 
make  reserve  good  after  notice  of  deficiency  subjects  bank  to  being  declared 
insolvent.  Savings  banks  must  carry,  in  cash  or  its  equivalent,  an  amount 
equal  to  4  per  cent  of  its  deposits;  2  per  cent  of  its  deposit  reliabilities 
must  be  in  coin  or  currency  of  standard  value,  in  its  own  keeping.  No  new 
loan  can  be  made  when  there  is  a  deficiency  in  reserve.  Deposits  with  com- 
mercial banks  are  not  construed  as  loans  by  savings  banks.  Not  more  than 
5  per  cent  of  deposits  of  any  savings  bank  can  be  deposited  in  any  other  one 
bank.  Commercial  banks  conducting  a  savings  department  must  keep  moneys 
and  accounts  separate  and  carry  the  reserves  required  in  each  department, 
respectively,  and  the  funds  of  the  savings  department,  of  the  commercial 
department  and  of  the  trust  company  department  must  be  independently 
treated  throughout,  and  each  remains  subject  to  distribution  to  the  creditors 
of  tlie  respective  departments  before  any  part  thereof  can  be  considered 
general  assets.  No  national  bank  can  be  the  depositary  of  any  bank  organized 
under  the  laws  of  California,  unless  such  national  bank,  at  the  request  of 
the  Superintendent  of  Banks,  submits  to  an  examination  by  him  or  his  duly 
appointed  examiner,  if  the  Superintendent  deems  it  necessary  for  such  an 
examination  to  be  made.  Act  of  March  1,  1909. 

CHAP.  IV.  58.  4  Cal.  Ap.,  429.  Though  pass  book  contains  by-law, 
requiring  notice,  after  suspension  by  the  bank  no  notice  is  required  before 
suit.  125  Cal.,  456.  59.  Deposits  by  married  women  and  minors  are  subject 
to  their  own  control  and  receipt  for  payment  from  such  discharges  the  bank. 
Act  March  1,  1909.  Where  one  bank  takes  an  assignment  of  all  the  property 
and  accounts  of  another  bank,  the  assignee  bank  is  liable  to  the  depositors 
of  the  assignor  bank.  65  Cal.,  71.  See  96  Cal.,  197,  holding  that  bank  not 
concerned  with  purpose  for  which  check  drawn;  it  must  pay  when  properly 
drawn. 

CHAP.  V.  Neg.  Ins.  Law  has  not  been  enacted,  as  such,  in  California, 
but  most  of  the  rules  of  the  Law  Merchant  declared  therein  are  declared 
by  the  Code  of  California  to  be  the  law  there.  65.  The  Code  defines  a 
check  as  "A  bill  of  exchange  drawn  upon  a  bank  or  banker,  and  payable  on 
demand  without  interest."  And  it  is  a  check,  though  drawn  by  a  bank. 
134  Cal.,  237.  85.  When  a  deposit  is  made  by  any  person  in  the  names  of 
the  depositor  and  another  person  or  persons,  and  in  form  to  be  paid  to  either 
or  the  survivor  or  survivors  of  them,  such  deposit  thereupon,  and  any  addi- 
tions thereto  made  by  either  of  such  persons,  upon  the  making  thereof  shall 
become  the  property  of  such  persons  as  joint  tenants,  and  the  same,  together 
with  all  interest  thereon,  shall  be  held  exclusively  for  the  use  of  the  persons 
so  named,  and  may  be  p'aid  to  either,  during  the  lifetime  of  all,  or  any, 
or  to  the  survivor  or  survivors  after  the  death  of  one  or  more  of  them,  and 
such  payments  and  the  receipt  or  acquittance  of  the  one  to  whom  such  pay- 
ment is  made  shall  be  a  valid  and  sufficient  release  and  discharge  of  such 
bank  for  all  payment  made  on  account  of  such  deposit.  Act  March  1,  1909. 
See  note  179.  88.  In  California  one  who  transfers  without  endorsement  does 
not  warrant  that  the  instrument  is  genuine.  He  warrants  simply  that  he 
has  no  knowledge  of  any  facts  tending  to  prove  it  worthless  or  invalid.  Sec. 
1771  Civil  Code;  139  Cal.,  564.  90.  In  California  if  not  presented  within 
10  days  the  drawer  and  endorsers  are  exonerated,  but  presentment  should 
be  promptly  made.  See  5  Cal.  Ap.,  39,  42.  101.  Bank  liable  if  it  pays  with 
,  notice  of  drawer's  death.  138  Cal.,  169. 


CHAP.  VI.  111.  124  Cal.,  90,  and  the  purchaser  remains  a  dep'ositor, 
same  as  before  the  check  was  given.  112.  In  California  bank  has  till  close 
of  business  day  to  determine  whether  check  is  good  or  account  sufficient, 
and  if  not  may  charge  ^back  the  amount  to  the  depositor;  but  where  the 
depositor  is  credited  and  the  drawer  charged,  which  the  bank  may  elect  to 
do,  it  is  payment.  6  Cal.  Ap.,  678.  114.  Erroneous  remittance  recovered 
from  post-office.  94  Cal.,  362. 

CHAP.  VII.  132.  Check  no  assignment  and  deposit  subject  to  attach- 
ment after  check  drawn  but  not  presented.  71  Pac.,  93.  139.  Bank  can  not 
recover  from  innocent  holder,  45  Cal.,  406;  and  is  bound  to  know  depositor's 
signature,  92  Cal.,  14.  Where  bank,  upon  identification  by  a  man  of  good 
standing,  pays  telegraphic  order  to  person  to  whom  telegraph  company  de- 
livered the  order,  the  bank  is  not  liable  for  negligence  and  the  telegraph 
company  must  answer  for  the  loss.  .52  Cal.,  280.  141.  Bank  can  not 
charge  depositor  with  payment  on  forged  endorsement.  97  Cal.,  208.  142. 
Bank  can  not  recover  from  agent  money  paid  on  a  raised  check,  where 
agent  has  paid  it  to  his  principal,  139  Cal.,  564,  where  bank  had  paid  to 
owner  amount  collected  on  item;  otherwise  it  may  recover  even  from  an 
innocent  holder.  Endorser  does  not  guaranty  that  check  has  not  been  raised. 
Bank  should  offer  to  return  check  and  demand  return  of  money.  45  Cal.,  46. 
143.  Bank  has  no  right  to  retain  forged  instrument.  134  Cal.,  237.  145. 
92  Cal.,  14.  14Cc.  In  California,  where  bank -merely  acts  as  collecting  agent 
and  pays  to  the  depositor  the  money  collected  from  the  drawee  bank,  where 
the  item  was  restrictively  endorsed,  for  collection  only,  the  bank  which  has 
paid  it  over  to  the  owner  of  the  item  cannot  be  made  to  return  the  amount 
to  the  drawee  bank.  There  is  no  warranty  implied  in  California.  139  Cal., 
564,  and  see  note  88b. 

CHAP.  Vlll.  147.  See  note  38b.  153.  Bank  is  not  exempt  from 
attachment  in  California;  but  attachment  is  vacated  if  bank  becomes  insol- 
vent. See  106  Cal.,  64;  39  Pac.,  215,  218.  Attachment  can  not  issue  against 
national  bank,  from  state  court.  127  Cal.,  453.  154.  Not  payment,  unless 
accepted  as  such,  until  paid.  5  Cal.  Ap.,  39;  78  Cal.,  15;  124  Cal.,  90.  155. 
In  California  there  is  no  limitation  to  actions  against  banks  for  deposits. 
Sec.  348,  Code  of  Civil  Procedure.  65  Cal.,  71.  Demand  must  be  made  before 
suit;  until  then  money  is  not  due.  100  Cal.,  18.  163.  No  interest  until 
demand,  unless  contracted  for.  100  Cal.,  18.  Entitled  to  interest  from  date 
of  suspension,  111  Cal.,  57.  165.  In  California  this  lien  is  given  by  statute. 
171.  Savings  bank  can  not  offset  deposit  against  claim  on  which  it  has  right  to 
foreclose  a  mortgage.  118  Cal.,  334.  Where  bank  has  no  knowledge  that 
deposit  does  not  belong  to  depositor  it  can  offset  against  his  note.  141  Cal., 
508.  174.  Claim  acquired  subsequently  can  not  be  offset.  135  Cal.,  597. 
179.  The  Act  of  March  1,  1909,  provides  that  a  surviving  husband  or  wife 
of  any  deceased  person,  or,  if  no  husband  or  wife  is  living,  then  the  children, 
and  if  no  children  are  living,  then  the  father  or  mother  of  such  decedent 
may,  without  procuring  letters  of  administration,  collect  of  any  bank  any 
sum  which  decedent  may  have  left  on  deposit  at  the  time  of  his  or  her  death, 
upon  making  affidavit  that  the  affiant  is  the  surviving  husband  or  wife,  or  that 
the  decedent  left  no  husband  or  wife  and  that  affiant  is,  or  affiants  are,  the 
childfen,  or  the  father  or  mother  of  decedent,  and  that  the  whole  amount  that 
decedent  left  on  deposit  in  any  and  all  banks  of  deposit  in  California  does 
not  exceed  $500.  The  affidavit  and  receipt  of  affiant  is  sufficient  acquittance 
to  the  bank  for  the  payment. 

CHAP.  IX.  183.  154  Cal.,  527,  531.  184.  7  Cal.  Ap.,  642;  154  Cal., 
527.  189.  If  book  and  order  for  all  the  funds  is  deposited  in  and  accepted 
by  the  bank,  before  death  of  the  donor,  this  is  a  valid  gift.  The  title  has 
then  passed  and  the  money  need  not  itself  be  transferred  or  the  transfer 
entered  on  the  bank's  books.  6  Cal.  Ap.,  144.  191.  In  Hellman  v.  Mc- 
Williams,  70  Cal.,  499,  it  was  held  that  the  assignment  of  a  deposit  to  a 
trustee,  for  the  benefit  of  the  assignor's  children  upon  his  death,  creates  a 
trust  where  the  trust  is  accepted  by  the  assignee,  though  the  assignor  has 
the  right  to  withdraw  some  of  the  money  from  the  trustee.  Alternative 
account  not  a  gift.  7  Cal.  Ap.,  642. 

CHAP.  X.  194.  To  wilfully  make,  draw,  deliver  or  try  to  deliver  check 
on  bank  or  banker,  knowing  at  the  time  of  drawing  it  that  there  are  not 
sufficient  funds  or  credit  with  the  bank  to  meet  the  check  in  full  when  pre- 
sented, and  with  intent  to  defraud,  is  punishable  by  imprisonment  for  one 
to  fourteen  years.  "Credit"  is  construed  to  be  an  arrangement  or  under- 
standing with  the  bank  or  depositary  for  the  payment  of  such  check.  195. 
4  Cal.  Ap.,  201.  196.  Overdraft  may  be  fraud  on  part  of  drawer,  or  it  may 
be  fraud  on  part  of  bank  officer.  60  Cal.,  126.  Promise  to  repay  overdraft 
is  implied.  125  Cal.,  407.  197.  Where  president  wrongfully  allows  over- 
drafts, or  directs  their  allowance,  he  is  liable  to  bank  for  loss.  60  Cal., 
126.  In  California  it  is  a  felony  for  an  officer,  director,  agent,  teller,  clerk 
or  employe  of  any  bank  to  knowingly  overdraw  his  account  and  thereby  obtain 
the  money,  notes  or  funds  of  the  bank.  201.  Where  deposited  only  for  col- 
lection, proceeds,  when  collected,  belong  to  depositor.  106  Cal.,  385.  In 
California  the  custom,  by  which  depositors  are  bound,  is  that  the  bank  is 
not  liable  for  proceeds  of  items  collected  until  the  proceeds  are  actually  re- 
ceived by  the  bank.  5  Cal.  Ap.,  408. 


\ 


THE  LAW  OF  DEPOSITS 


BY 


FRED  W.  WEITZEL,  LL.  M., 

OF  THE  DISTRICT  OF  COLUMBIA  BAR, 

WASHINGTON,  D.  C. 


J.  D.  MILANS  &  SONS, 

PUBLISHERS, 
WASHINGTON,  D.  C. 


YKy 


Copyright  1910, 
By  FRED  W.  WEITZEL. 


To  HON.  FRANCIS  Fox  OLDHAM, 

This  volume  is  respectfully  dedicated, 

as  a  token  of  appreciation. 


5561)45 


PREFACE. 

This  volume  is  prepared  for  the  special  use  of  bankers 
and  their  assistants,  the  bank  clerks,  whose  sincere  and 
active  ambition  to  improve  in  efficiency  never  lags,  but  whose 
time  is  so  much  occupied  with  the  duties  crowded  upon 
them  that  a  general  law  course  is  impracticable,  while  the 
average  law  book  is  incomprehensible.  It  is  hoped  that 
business  men  will  also  find  it  useful. 

The  author's  purpose  has  been  to  make  a  clear  statement 
of  the  principles  governing  the  law  of  deposits,  explain  stat- 
utes and,  where  there  is  a  conflict,  indicate  to  the  reader  in 
each  state  the  law  in  his  jurisdiction  or  the  better  practice 
to  follow  in  view  of  the  conflict.  Some  cases  are  cited,  a 
reading  of  which  will  be  profitable;  but  a  general  annota- 
tion has  been  omitted,  as  it  would  confuse  more  than  en- 
lighten. Most  cases  cited  will  be  found  to  be  annotated  in 
the  reports,  and  in  the  National  Reporter  System  the  last 
case  is  a  key  to  all  earlier  ones.  While  the  writer  has  re- 
ferred to  the  standard  works  on  the  law  of  banking,  such 
as  Morse,  Zane,  Bolles  and  others,  he  has  based  most  of  his 
statements  herein  on  the  decisions  of  the  courts  as  found 
in  the  reports  of  the  cases  themselves.  It  is  believed  that 
the  statements  are  fully  sustained  by  the  authorities. 

If  the  volume  is  found  practical  and  useful  by  the  banker 
the  author  will  be  more  than  satisfied.  If  the  legal  profes- 
sion finds  it  reliable,  he  will  feel  well  repaid  for  his  labor. 

FRED  W.  WEITZEL. 

Washington,  March  i,  1910. 


SEC.  1 


CHAPTER  I. 
DEPOSITS. 

I.  Relation  of  Depositor  to  Bank — Where  A  delivers 
to  B  an  article  of  personal  property,  which  'B  is  to  keep 
for  A  and  return  to  him  when  the  purpose  for  which  the 
article  was  delivered  has  been  accomplished,  this  is  in  law 
called  a  bailment.  A,  the  one  who  delivers  the  thing,  is 
called  the  bailor;  B,  the  one  to  whom  it  is  delivered,  is 
called  the  bailee.  The  thing  which  is  the  subject  of  the  bail- 
ment may  be  left  with  the  bailee  for  repairs,  it  may  be  that 
the  bailee  is  borrowing  it  for  his  own  purpose,  or  it  may  be 
that  it  is  simply  for  safe  keeping  for  the  bailor.  Where  the 
bailment  is  made  for  the  benefit  of  the  bailor  and  the  bailee 
receives  no  compensation  or  benefit  for  keeping  the  thing 
bailed,  but  must  return  that  very  thing  to  the  bailor,  we 
have  what  is  properly  called  a  deposit,  and  such  is  the  special 
deposit. 

A  general  deposit  of  money  in  bank  differs  much  from 
such  deposit  as  is  mentioned  above.  In  the  case  of  the 
bailment  the  thing  deposited  remains  the  property  of  the 
bailor  and  if  the  bailee  use  the  thing  for  any  purpose  other 
than  that  for  which  it  was  delivered,  he  will  be  liable  for 
trespass  or  conversion.  If  the  thing  be  destroyed  without 
the  gross  negligence  of  the  bailee  the  loss  will  be  on  the 
bailor.  With  an  ordinary  deposit  in  bank,  however,  a  dif- 
ferent legal  relation  arises.  The  depositor  does  not  expect 
to  receive  back  the  identical  pieces  of  money,  as  in  the  case 
of  the  bailment.  He  expects  to  receive  money  of  equal 
value,  or  a  credit,  and  the  bank  becomes  indebted  to  him  for 
the  amount  of  the  deposit.  While  a  deposit  is,  in  effect,  a 


8  SEC.  2 

loan  of  money  to  the  bank,  there  are  some  differences  be- 
tween a  loan  and  a  deposit.  By  various  regulations  of  the 
business  of  banks  the  law  places  restrictions  upon  the  use 
which  a  bank  may  make  of  its  deposits,  while  one  may  make 
any  use  he  pleases  of  money  he  borrows. 

2.  Classes  of  Deposits — Bank  deposits  are  usually  di- 
vided into  three  classes:  general,  special  and  specific. 

GENERAL  DEPOSITS. 

3.  When  a  party  opens  an  account  by  depositing  money, 
and  when  a  regular  customer  makes  a  deposit,  unless  there 
is  an  agreement  to  the  contrary,  the  bank  mingles  the  amount 
received  with  its  other  funds,  the  entire  fund  is  the  prop- 
erty of  the  bank,  and  the  depositor  becomes,  not  a  bailor, 
but  a  creditor  of  the  bank.    The  relationship,  therefore,  be- 
tween a  bank  and  its  general  depositors,  is  that  of  debtor 
and  creditor.    The  bank  is  indebted  to  the  depositor  in  the 
sum  of  his  deposit  and  the  bank  is  the  absolute  owner  of 
the  money  which  it  has  accepted  as  soon  as  the  same  has 
been  passed  over  the  counter.    The  depositor  has  no  right  to 
any  specific  money.     He  has  only  a  claim  against  the  bank 
as  a  general  creditor.    Bank  of  Blackwell  v.  Dean,  9  Okla., 
626;  Butcher  v.  Butler,  114  S.  W.,  564,  a  Missouri  case; 
Burton  v.  U.  S.,  196  U.  S.,  283.  A  deposit  will  be  presumed 
to  be  intended  as  a  general  deposit  unless  there  is  an  agree- 
ment to  the  contrary,  especially  where  loose  money  is  de- 
posited.    If  a  sealed  box,  bag  or  package,  or  marked  en- 
velope containing  money  were  deposited  it  would  be  rea- 
sonable to  presume  that  it  was  intended  as  a  special  deposit, 
but  evidence  of  a  custom  or  of  intent  would  be  admissible 
to  show  whether  it  was  actually  a  general  deposit.     Loose 
money  or  paper  deposited  without  any  agreement  or  custom 
to  the  contrary  will  be  presumed  to  be  a  general  deposit. 

4.  In  Case  of  Insolvency — In  case  of  insolvency  of  the 


SEC.  5  9 

bank,  every  general  depositor  is  a  creditor  of  the  bank. 
Technically  every  creditor  is  a  general  creditor.  If  one 
is  entitled  to  payment  in  full  it  is  either  because  the  bank 
holds  a  special  deposit  or  security,  which  has  always  re- 
mained his  property,  the  bank  being  a  bailee  under  an  agree- 
ment, or  because  the  bank  has  violated  a  trust  and  by  rea- 
son of  the  wrong  holds  a  special  fund  which  belongs  to  the 
owner.  In  a  national  bank  all  general  depositors  arid  other 
creditors  share  alike.  In  some  States  the  depositors  in 
State  banks  are  by  statute  preferred  over  other  creditors  and 
are  paid  in  full  before  other  claimants  of  an  insolvent  bank. 

5.  Frequently  when  a  bank  fails  attempts  are  made  to 
establish  rights  to  preferences  by  showing  that  certain  de- 
posits were  "special  deposits."     But  the  ordinary  manner 
in  which  banks  do  and  in  these  days  must  do,  their  business, 
to  satisfy  the  demands  of  commerce,  facilitate  negotiations 
and  meet  the  customs  which  present  day  business  methods 
require,  and  the  general  intentions  of  those  who  do  ousiness 
with  banks,  when  sifted  out,  will  show  the  fallacy  of  this 
clamor  for  preferred  payment  of  claims,  as  well  as  the  ob- 
vious injustice  of  the  claims.    See  Sec.  198  et  seq. 

6.  Even  though  money  is  deposited  for  a  specified  time, 
or  upon  unusual  conditions,  if  there  is  no  understanding 
that  the  money  is  not  to  be  mingled,  the  bank  will  mingle 
the  amount  received  with  the  general  mass  of  its  property, 
and  in  most  States,  the  deposit  is  a  general  one,  to  be  repaid 
out  of  the  general  mass  of  the  bank's  assets. 

7.  One  who  purchases  from  a  bank  a  draft  drawn  on 
another  bank  has  a  claim  on  the  draft  only,  and  not  upon 
the  specific  money  which  he  paid  for  the  draft,  unless  the 
bank  official  who  issued  the  draft  knew  when  he  drew  it 
that  there  were  no  funds  in  the  bank  upon  which  drawn  to 
meet  it.    This  of  course  would  be  a  fraud,  and  if  the  pur- 
chase money  could  be  traced  the  purchaser  would  have  a 
right  to  recover  it.     Where,  however,  a  customer  of  the 


10  SEC.  8 

bank  purchases  a  draft  and  pays  for  it  by  check  on  his  ac- 
count in  the  same  bank,  if  the  draft  is  not  paid,  even  though 
the  officer  knew  when  he  issued  the  draft  that  it  would  not 
be  paid,  the  customer  would  still  remain  a  general  creditor. 
He  has  simply  failed  in  an  attempt  to  withdraw  from  his 
account  the  amount  of  the  draft  purchased.  The  bank  re- 
ceived no  actual  cash  from  him.  It  was  a  bookkeeping  tran- 
saction only.  He  was  a  general  creditor  when  he  purchased 
the  draft,  and  the  draft  being  worthless  he  is  still  a  general 
creditor.  Clark  v.  Toronto  Bank,  82  Pac.,  582,  a  Kansas 
case. 

8.  If  A  deposit  money  in  bank  to  be  paid  to  B,  upon  -a 
contingency,   this   is  a  general   deposit   unless  there   is   an 
agreement  that  the  identical  money  will  be  kept  separate 
and  paid  to  B.    As  to  whether  A  or  B  would  be  the  proper 
claimant  we  will  discuss  hereafter.    See  Sec.  %fr  3QC. 

9.  Frequently  one  who  is  already  a  depositor  in  a  bank, 
for  his  own  convenience,  or  to  prevent  confusion,  will  open 
another  account  as  "attorney,"  "agent,"  or  "trustee,"  etc. 
It  may  be  that  he  is  treasurer  of  some  organization  and 
wishes  to  keep  the  fund  as  treasurer  separate  from  his  own 
moneys.     As  to  the  depositor  this  is  a  special  fund,  but  it 
is  not  the  creation  of  a  special  fund  as  between  himself  and 
the  bank,  except  that  checks  drawn  on  his  personal  account 
cannot  be   charged   against   the   special   account,   and   vice 
versa.     It  represents  an  account  of  a  general  creditor  and 
in  case  the  bank  failed  there  would  be  a  general  claim  only. 

10.  Where  an  "officer  of  a  State  or  of  the  Federal  Gov- 
ernment is  not  prohibited  by  law  from  depositing  his  money 
as  such  officer  in  bank,  and  he  does  deposit  it,  this  is  a  gen- 
eral deposit.     A  case  recently  decided  in  Oklahoma  holds 
that  where  the  officer  did  not  have  authority,  though  not 
prohibited,  the  deposit  was  wrongfully  made  and  when  the 
bank  failed  the  fund -was  held  to  be  a  trust  fund  and  paid 
prior  to  other  creditors.     This  case  is  contrary  to  the  de- 


SEC.  11  11 

cisions  in  other  States  and  was  not  well  considered.  Watts 
v.  Board  of  Com'rs.,  95  Pac.,  771 ;  In  re  Salmon,  145  Fed., 
649,  and  see  Par.  27!).  Usually  security  is  required  to  pro- 
tect the  Government  and  the  officer  is  held  personally  liable, 
but  as  to  the  assets  of  the  bank  there  is  only  a  right  to  share 
with  other  creditors.  If  the  law  prohibits  the  deposit  by 
an  officer,  the  bank  is  guilty  of  a  wrong  in  receiving  such 
deposit  and  where  the  money  can  be  traced  it  can  be  re- 
covered in  full. 

11.  If  money  be  deposited  in  bank  to  A's  credit,  A  intend- 
ing to  use  the  money  for  a  special  purpose,  this  does  not 
alone  make  it  a  special  deposit.     It  is  not  any  special  pur- 
pose,  use   or   trust  which   A   impresses   upon   the   deposit 
which  makes  it  a  special  deposit.    No  matter  what  A  might 
intend  to  use  the  money  for,  it  is  a  general  deposit  unless 
otherwise  made  special. 

12.  One  who  holds  a  certificate  of  deposit  is  a  general 
creditor,  except  where  he  is  given  preference  as  a  depositor 
in  a  State  or  savings  bank  under  the  State  law. 

13.  Deposit  a  Debt — After  the  deposit  has  been  made, 
the  indebtedness  of  the  bank  is  absolute  until  payment.    The 
title  to  the  money  passes  to  the  bank  and,  though  the  iden- 
tical pieces  of  money  be  stolen,  embezzled  or  destroyed  be- 
fore the  deposit  is  mingled  with  the  other  moneys  of  the 
bank,  the  bank  is  indebted  to  the  depositor  just  the  same. 
If  the  bank  be  insolvent  when  the  money  is  received,  yet 
the  money  becomes  the  property  of  the  bank  and  the  de- 
positor becomes  a  creditor  to  that  extent,  unless  the  officers 
knew  that  the  bank  was  actually  insolvent  at  the  time  the 
money  was  received.    If  a  bank  receive  deposits  after  busi- 
ness hours  and  hold  same  over  till  the  next  day,  and  the 
bank  fails  to  open  the  next  day,  the  deposits  should  be  re- 
turned, unless  the  bank  was  in  the  habit  of  receiving  depos- 
its after  usual  business  hours,  when  they  would  be  regarded 
as  having  been  accepted  on  that  day. 


12  SEC.  14 

14.  Forged  or  Counterfeit  Paper. — If  forged  or  counter- 
feit paper  or  money  be  deposited,  even  though  the  amount 
purporting  to  be  represented  by  such  deposit  has  been  cred- 
ited  to   the   depositor,   the   depositor   is   entitled   to   no 
credit  and  the  amount  can  be  charged  back  to  his  ac- 
count.   The  paper  or  money  being  worthless,  no  considera- 
tion passed  to  the  bank  for  the  credit  vgiven  and  the  bank  is 
not  bound  thereby.     See  Sec.  88e,  112,  138. 

SPECIFIC  DEPOSITS. 

15.  A  specific  deposit  is  where  money  is  deposited  with  a 
bank  with  specific  instructions  to  apply  the  money  in  a  cer- 
tain way,  as  to  pay  a  note  of  the  depositor,  or  to  credit  to 
some  one  else,  or  to  take  up  a  mortgage,  etc.    In  such  cases 
the  bank  must  follow  instructions  and  use  the  money  for 
the  purpose  for  which  it  was  deposited,  and  if  it  does  not 
do  so,  or  misapplies  the  fund,  the  money  can  be  recovered, 
provided  the  bank  received  money,  or  collected  money  from 
paper  received  and  it  can  be  traced.    See  Sec.  201. 

Where  money  is  deposited  in  Bank  A,  to  the  account  of 
Bank  B,  with  instructions  to  telegraph  the  amount  to  Bank 
C,  this  is  a  specific  deposit.  It  is  not  a  special  deposit,  for 
the  reason  that  it  is  not  to  keep  the  money  or  deliver  the 
identical  pieces  to  C,  and  it  may  mingle  the  money  received 
with  its  other  funds,  but  it  must  telegraph  a  like  amount  to 
Bank  C.  It  is  not  a  general  deposit  because  there  is  a  duty 
to  perform,  and  if  it  violates  this  duty  it  will  not  be  in- 
debted to  the  depositing  bank,  but  will  be  deemed  a  trustee 
with  a  fund  of  $1,000  in  its  hands  belonging  to  Bank  B  by 
reason  of  the  wrong  committed.  If  the  $1,000  remains  in 
Bank  A,  or  there  is  on  hand  a  like  amount  which  cannot 
be  proved  to  have  come  in  afterwards  and  to  have  some 
other  trust  attached,  it  can  be  recovered. 

1 6.  Items  deposited  with  a  bank  for  "collection  only," 


SEC.  17  13 

money  collected  by  the  bank  as  agent  and  money  deposited 
for  the  purpose  of  having  the  bank  send,  lend  or  pay  the 
same,  also  papers  delivered  to  the  bank  as  security,  are  the 
property  of  the  depositor,  and  if  the  bank  violates  its  duty, 
or  fails  before  it  has  had  an  opportunity  to  perform  the 
duty,  and  the  items  or  the  proceeds  thereof  remain  in  the 
bank  at  the  time  it  is  closed,  or  come  in  after  the  bank  has 
been  closed,  they  should  be  returned  to  the  depositor  in 
full.  So  where  a  bank,  the  officers  not  being  certain  as  to 
its  solvency,  keeps  out  deposits  and  marks  them  with  the 
depositors'  names,  and  the  bank  is  found  to  be  insolvent 
and  closes,  the  deposits  so  held  out  should  be  returned  in 
full.  In  any  case  there  can  be  no  return,  or  payment  in  full 
before  other  creditors,  unless  the  item  or  money  can  be 
traced  into  the  hands  of  the  receiver.  Commissioners  of 
Crawford  Co.  v.  Strawn,  157  Fed.,  49.  See  Sec.  201. 

17.  Change  From  One  Class  to  Another — A  general 
deposit  may,  by  agreement  or  order,  be  changed  to  a  special 
deposit  or  a  specific  deposit.    Likewise  a  specific  or  a  special 
deposit  may  be  changed  to  a  general  deposit,  a  specific  de- 
posit to  a  special,  and  a  special  to  a  specific. 

Where  a  general  deposit  is  ordered  to  be  changed  to  one 
of  the  other  class,  however,  the  depositor  remains  a  cred- 
itor until  the  change  has  actually  been  made  and  the  money 
actually  separated  in  the  case  of  a  special  deposit,  and  the 
appropriaion  actually  made  by  the  bank  in  the  case  of  a 
specific  deposit.  This  is  because  the  bank  does  not  actually 
receive  money,  but  changes  a  credit  of  the  general  depositor 
into  a  fund. 

SPECIAL  DEPOSIT. 

1 8.  Where  bonds,  stocks,  or  other  valuables,  or  money  in 
a  separate  package  (or  even  loose  money  where  the  iden- 
tical pieces  are  to  be  kept)  are  placed  with  a  bank,  to  be 


14  SEC.  19 

kept  and  the  identical  articles  returned,  we  have  a  special 
deposit.  The  owner  has  the  right  to  have  the  specific  ar- 
ticles returned,  and  if  the  bank  has  made  any  profit  by  a 
wrongful  use  of  articles,  the  depositor,  who  is  in  this  case  a 
bailor,  is  entitled  to  receive  the  profits  also.  The  main 
function  of  the  bank,  in  the  beginning,  was  the  safe  keep- 
ing of  valuables  in  this  way,  but  in  pur  times  the  safe  de- 
posit vaults  are  used  for  this  purpose. 

19.  Power  of  Bank  to  Receive — A  bank  has  power  to 
receive  special  deposits.     Although  the  right  of  a  national 
bank  to  do  so  was  questioned  at  one  time,  the  power  is  now 
regarded  as  one  of  the  incidental  powers  of  the  bank.    The 
National  Bank  Act  impliedly  authorizes  the  taking  of  special 
deposits,  for  Section  5228  of  the  Revised  Statutes  of  the 
United  States  provides  for  delivery  of  special  deposits  by 
banks  which  have  defaulted  in  payment  of  circulating  notes. 
Some  of  the  States  expressly  authorize  the  State  banks  to 
receive  special  deposits. 

20.  Liability  of  Bank  For — Where  there  is  a  special 
deposit  the  very  thing  deposited  must  be  returned  to  the  de- 
positor, or  held  for  the  special  purpose  for  which  it  was 
made.    In  the  case  of  a  general  deposit  we  learned  that  the 
bank  was  debtor  and  the  depositor  creditor  for  the  amount. 
Not  so  here.    The  bank  is  bailee  and  the  property  remains 
the  property  of  the  depositor,  or  a  trust  fund  for  the  pur- 
pose for  which  it  was  made.    If  the  bank  use  such  diligence 
as  a  prudent  man  would  use  in  attending  to  like  affairs  the 
bank  will  not  be  liable  for  a  loss.    In  fact,  in  some  States  it 
is  held  that  only  'such  diligence  need  be  exercised  as  the 
bank  uses  in  its  own  affairs.    Where  the  bank  uses  care  in 
selecting  its  officers  and  employees  and  trusts  its  own  prop- 
erty to  them  along  with  the  property  of  the  special  depositor, 
and  the  officers  or  employees,  outside  of  their  line  of  duty, 
steal  or  embezzle  the  special  deposit,  the  bank  will  not  be 
liable.    If  the  bank  knew,  or  ought  to  have  known,  that  the 


SEC.  21  15 

employee  or  officer  was  dishonest,  or  might  have  known  by 
using  such  care  as  a  prudent  man  would  use  in  such  cases, 
I  think  the  bank  would  be  liable.  While  some  cases  have 
held  that  only  such  care  as  the  bank  uses  in  its  own  affairs 
need  be  exercised,  banks  nowadays  usually  have  strong  safe 
deposit  vaults  and  facilities  for  keeping  valuables,  and  they 
also  usually  have  men  whose  reputation  for  honesty  and  in- 
tegrity induces  customers  to  make  such  deposits.  The  de- 
positor having  the  right  to  feel  secure,  the  bank  ought  to  be 
called  upon  to  use  more  care  in  the  selection  of  its  officers 
and  employees  than  some  banks  do,  and  it  ought  to  be  held 
to  the  care  that  a  prudent  man  would  exercise.  And  the 
decisions  are  tending  in  that  direction.  Of  course  where 
the  bank  is  compensated,  or  receives  a  direct  benefit  by  ac- 
cepting the  special  deposit,  it  will  be  held  to  a  greater  degree 
of  care  than  where  it  performs  the  service  of  safe  keeping 
without  compensation. 

21.  Returning — If  the  bank  is  negligent  and  delivers 
the  special  deposit  to  the  wrong  person  the  bank  will  be 
liable.     As  where  a  bank  delivers  to  a  depositor's  wife  a 
special  deposit,  without  requiring  the  production  of  the 
receipt  or  an  order  from  the  depositor ;  and  where  an  or- 
der calling  for  coupons  from  bonds  specially  deposited  is 
not  carefully  read  and  the  bonds  themselves  delivered 
to  the  bearer  of  the  order,  the  bank  will  be  held  liable. 

22.  Not  Assets  of  Bank — As  the  bank  is  merely  a  bailee 
of    property    specially    deposited,    the    title    remains    in 
the   depositor  and  cannot  be  counted  as  assets  of  the 
bank  for  any  purpose. 

23.  When  Is  A  Deposit  Special? — In  speaking  of  gen- 
eral deposits  it  was  pointed  out  that  many  deposits  ordi- 
narily termed  "special"  are  really  general  deposits.     An 
express  agreement  when  special  deposits  are  taken  would 
save  trouble  for  all  parties  concerned.     When  there  is 
no  agreement  or  custom,  a  deposit  of  loose  money  or 


16  SEC.  24 

paper  will  be  regarded  as  a  general  deposit  (leaving  out 
the  consideration  of  the  question  of  collections),  and  a 
package,  box  or  bag  of  money,  sealed,  or  of  other  valu- 
ables, would  be  presumed  to  be  a  special  deposit,  to  be 
held  separately  by  the  bank. 

24.  What  May  Be  Subject  of  Special  Deposit — Any- 
thing which  a  bank  consents  to  receive  on  special  deposit 
may  be  the  subject  of  such  deposit.  First  National  Bank 
of  Carlisle  v.  Graham,  100  U.  S.,  699.  Preston  v.  Prather, 
137  U.  S.,  604.  Butcher  v.  Butler,  114  S.  W.,  564. 


SEC.  25  17 

CHAPTER  II. 
THE  DEPOSITORS. 

25.  Deposits,  when  classified  according  to  the  deposi- 
tors for  whose  accounts  they  are  carried,  may  be  divided 
into  individual,  bank  and  public  deposits. 

All  deposits  by  private  individuals  as  such,  by  in- 
dividuals as  representatives  of  other  individuals  or  bodies 
of  individuals,  by  companies,  firms,  corporations,  part- 
nerships, etc.,  are  individual  deposits. 

The  general  legal  status  of  an  individual  depositor  is 
no  different  from  that  of  a  bank  which  deposits  in  an- 
other bank,  but  as  the  national  and  state  banking  laws 
provide  the  manner  of  keeping  reserves,  public  deposits, 
and  deposits  in  other  banks,  and  the  banking  authorities 
of  the  state  and  federal  governments  require  separate 
accounting  in  regard  to  these  different  items  in  the  re- 
ports made  by  banks,  they  are  divided  into  individual 
deposits,  public  deposits,  deposits  in  banks  which  are 
reserve  agents  and  deposits  in  banks  not  reserve  agents, 
etc.  A  subsequent  chapter  deals  with  reserves. 

Except  where  otherwise  noted,  the  principles  stated 
herein  relate  to  all  deposits,  whether  individual  deposits 
or  deposits  by  banks. 

26.  Bank  May  Select  Its  Depositors — A  railroad  gen- 
erally must  accept  such  business  as  is  tendered  it ;  a  hotel 
keeper  admit  all  comers;  i.  e.,  they  cannot  at  their  own 
pleasure  accept  of  refuse  to  accept  passengers  or  guests. 
A  bank,  however,  while  it  is  in  the  nature  of  a  public 
institution    (called    quasi-public),    need    not    accept    de- 
posits tendered  it  unless  it  wishes  to  serve  the  one  mak- 


18  SEC.  27 

ing  the  tender,  and  if  a  bank  does  not  wish  to  retain  the 
deposit  of  one  who  has  been  a  depositor,  it  may  close 
the  account,  tender  him  the  balance  due  and  refuse  to 
receive  further  deposits  from  him.  Likewise  the  de- 
positor may  terminate  the  relation  at  any  time  he  sees  fit, 
by  withdrawing  his  balance,  unless  the  bank  has  some 
lien  or  right  of  set-off  against  it,  or  there  is  a  contract 
whereby  the  money  must  be  left  for  a  specified  time.  In 
the  latter  case,  however,  it  would  be  a  loan  and  not  a 
deposit.  Thatcher  v.  State  Bank,  7  N.  Y.  Sup.  Ct,  121. 
27.  Deposits  of  Public  Moneys — The  State  statutes 
provide  the  manner  in  which  deposits  of  public  funds 
of  the  State,  county  or  city  shall  be  kept.  These  statutes 
should  be  carefully  followed  by  the  officers  making  de- 
posits and  by  the  banks  receiving  them.  If  the  State 
law  gives  the  county  the  right  to  make  any  regulations, 
or  empowers  the  city,  by  its  municipal  government,  to 
make  ordinances  regarding  the  keeping  of  the  funds,  all 
these  should  be  carefully  complied  with.  Be  sure  that 
the  officer  who  makes  a  deposit  of  public  moneys  has  au- 
thority to  deposit  it,  and  then  be  sure  that  he  has  au- 
thority to  make  the  deposit  in  your  bank.  In  some 
States  the  officer  who  holds  public  money  is  personally 
responsible  for  it,  in  which  event  he  may,  but  ought  not, 
treat  it  the  same  as  his  own  money.  In  some  States 
he  is  neither  expressly  authorized  nor  prohibited  from 
depositing  funds  in  banks  and  is  not  held  liable  if  he 
uses  care  in  selecting  the  bank,  and  in  watching  the  con- 
duct of  the  bank  and  its  condition.  If  he  has  no  dis- 
cretion in  making  the  selection,  but  must  deposit  in  such 
depositary  as  is  designated,  he  will  not  be  personally 
liable  if  he  obeys  the  law  and  the  designated  depositary 
fails.  In  case  the  officer  is  personally  liable  and  makes 
good  to  the  government,  he  will  have  a  claim  against 
the  bank  for  the  deposit.  In  that  event,  the  money  being 


SEC.  27a  19 

his  own,  he  could  offset  it  against  a  private  debt  due 
the  bank. 

27a.  Public  deposits  should  always  be  carried  as  such, 
both  for  the  protection  of  the  bank  and  its  creditors,  and 
for  the  protection  of  the  officer. 

27b.  It  has  been  held  that  where  a  public  officer  is 
prohibited  by  statute  from  "loaning"  the  public  funds, 
he  will  not  be  liable  for  a  violation  of  the  statute  if  he 
deposits  the  money  in  bank,  even  though  at  interest, 
provided  the  money  is  always  subject  to  his  order. 
Baker  v.  Williams  &  England  Banking  Co.,  70  Pac., 
711,  42  Oregon,  213.  If  it  is  made  unlawful  by  statute 
for  him  to  deposit  the  money  in  bank  or  in  any  but 
designated  banks,  and  a  bank  not  authorized  receives 
a  deposit  from  him,  the  bank  will  be  liable  to  the  State 
as  a  trustee  with  funds  of  the  public,  and  the  amount 
can  be  recovered  in  full.  Brown  v.  Sheldon  State  Bank 
(Iowa)  117,  N.  W.,  289.  If  the  bank  be  insolvent,  how- 
ever, only  so  much  as  can  be  traced  can  be  recovered  in 
full,  and  the  government  is  creditor  for  the  balance.  Com- 
missioners of  Crawford  County  v.  Strawn,  157  Fed.,  49. 

28.  There  is  nothing  in  the  laws  relating  to  national 
banks  which  will  prevent  a  national  bank  from  becoming 
the  depositary  for  State,  county  or  city  moneys.     The 
question  is  whether  the  laws  of  the  State  allow  or  pre- 
vent deposits  in  national  banks.     Bank  v.  Ferguson,  48 
Kan.,  732. 

29.  Public  Moneys  of  the  United  States— The  Revised 
Statutes  of  the  United  States  provide  as  follows: 

Sec.  3620. 

"It  shall  be  the  duty  of  every  disbursing  officer  having  any  public 
money  intrusted  to  him  for  disbursement  to  deposit  the  same  with 
the  Treasurer  or  some  one  of  the  assistant  treasurers  of  the  United 
States,  and  to  draw  from  the  same  only  as  it  may  be  required  for 
payments  to  be  made  by  him  in  pursuance  of  law;  and  draw  from 
the  same  only  in  favor  of  the  persons  to  whom  payment  is  made, 


20  SEC.  30 

and  all  transfers  from  the  Treasurer  of  the  United  States  to  a  dis- 
bursing officer  shall  be  by  draft  or  warrant  on  the  Treasurer  or 
assistant  treasurer  of  the  United  States.  In  places,  however,  where 
there  is  no  Treasurer  or  assistant  treasurer,  the  Secretary  of  the 
Treasury  may,  when  he  deems  it  essential  to  the  public  interest, 
specially  authorize  in  writing  the  deposit  of  such  public  money  in 
any  other  public  depository,  or,  in  writing,  authorize  the  same  to 
be  kept  in  any  other  manner  and  under  such  rules  and  regulations 
as  he  may  deem  most  safe  and  effectual  to  facilitate  the  payments 
to  public  creditors." 

It  will  be  noted  that  the  above  section  permits  the 
Secretary  of  the  Treasury  to  authorize  deposits  in  other 
public  depositaries  in  places  where  there  is  no  Treasurer 
or  Assistant  Treasurer.  These  depositaries  must  have 
been  previously  designated  by  the  Secretary  of  the 
Treasury  as  provided  by  Sec.  5153  of  the  Revised 
Statutes  of  the  United  States,  as  amended  by  the  act  of 
March  4,  1907: 

"All  national  banking  associations,  designated  for  that  purpose 
by  the  Secretary  of  the  Treasury,  shall  be  depositaries  of  public 
money,  under  such  regulations  as  may  be  prescribed  by  the  Secre- 
tary; and  they  may  also  be  employed  as  financial  agents  of  the 
Government;  and  they  shall  perform  all  such  reasonable  duties, 
as  depositaries  of  public  money  and  financial  agents  of  the  Govern- 
ment, as  may  be  required  of  them.  The  Secretary  of  the  Treasury 
shall  require  the  associations  thus  designated  to  give  satisfactory 
security,  by  the  deposit  of  United  States  bonds  and  otherwise,  for 
the  safe-keeping  and  prompt  payment  of  the  public  money  deposited 
with  them,  and  for  the  faithful  performance  of  their  duties  as 
financial  agents  of  the  Government :  Provided,  That  the  Secretary 
shall,  on  or  before  the  first  of  January  of  each  year,  make  a  public 
statement  of  the  securities  required  during  that  year  for  such 
deposits.  And  every  association  so  designated  as  receiver  or  deposi- 
tary of  the  public  money  shall  take  and  receive  at  par  all  of  the 
national  currency  bills,  by  whatever  association  issued,  which  have 
been  paid  into  the  Government  for  internal  revenue,  or  for  loans 
or  stocks:  Provided,  That  the  Secretary  of  the  Treasury  shall  dis- 
tribute the  deposits  herein  provided  for,  as  far  as  practicable, 
equitably  between  the  different  States  and  sections." 

30.  The  regulations  of  the  Treasury  Department  pro- 
vide, under  the  statutes,  how  public  deposits  shall  be 
received  and  kept.  Any  national  bank  desiring  to  be 
designated  should  write  to  the  Secretary  of  the  Treasury 


SEC.  31  21 

for  information  as  to  how  it  should  proceed  to  be  desig- 
nated and  authorized  to  act  as  a  public  depositary.  The 
Treasury  Department  furnishes  no  forms  for  application, 
but  if  an  application  is  received  by  the  Department  the 
applicant  will  be  advised  whether  it  is  worth  while  seek- 
ing designation.  Local  necessity  for  such  depositary 
and  the  political  and  public  backing  count  for  much.  If 
designated  full  instructions  will  be  furnished. 

31.  Since  the  act  of  May  30,  1908,  national  banks  act- 
ing as   depositaries   must  pay   at  least   i%   interest  on 
public  deposits. 

Sec.  15,  Act  of  May  30,  1908: 

"That  all  national  banking  association  designated  as  regular  de- 
positaries of  public  money  shall  pay  upon  all  special  and  additional 
deposits  made  by  the  Secretary  of  the  Treasury  in  such  depositaries, 
and  all  such  associations  designated  as  temporary  depositaries  of 
public  money  shall  pay  upon  all  sums  of  public  money  deposited 
in  such  associations  interest  at  such  rate  as  the  Secretary  of  the 
Treasury  may  prescribe,  not  less,  however,  than  one  per  centum 
per  annum  upon  the  average  monthly  amount  of  such  deposits: 
Provided,  however,  That  nothing  contained  in  this  Act  shall  be 
construed  to  change  or  modify  the  obligation  of  any  association  or 
any  of  its  officers  for  the  safe  keeping  of  public  money:  Provided 
further,  that  the  rate  of  interest  charged  upon  such  deposits  shall 
be  equal  and  uniform  throughout  the  United  States." 

32.  Deposits  By  Certain  Postmasters — Section  3847  of 
the  Revised  Statutes  of  the  United  States  provides  that: 

"Any  postmaster,  having  public  money  belonging  to  the  Govern- 
ment, at  an  office  within  a  county  where  there  are  no  designated 
depositaries,  treasurers  of  mints,  or  Treasurer  or  assistant  treasurers 
of  the  United  States  may  deposit  the  same,  at  his  own  risk  and 
in  his  official  capacity,  in  any  national  bank  in  the  town,  city,  or 
county  where  the  said  postmaster  resides;  but  no  authority  or  per- 
mission is  or  shall  be  given  for  the  demand  or  receipt  by  the  post- 
master, or  any  other  person,  of  interest,  directly  or  indirectly,  on  any 
deposit  made  as  herein  described ;  and  every  postmaster  who  makes 
any  such  deposit  shall  report  quarterly  to  the  Postmaster-General 
the  name  of  the  bank  where  such  deposits  have  been  made,  and  also 
state  the  amount  which  may  stand  at  the  time  to  his  credit." 

33.  Where  a  postmaster  has  funds  thus  deposited  they 


22  SEC.  33 

are  at  his  own  risk.  If  the  bank  fails  the  Post  Office 
Department  looks  to  the  postmaster  for  payment,  though 
he  must  carry  the  account  not  as  an  individual  personal 
account,  but  as  "Postmaster."  Neither  the  United 
States  nor  the  postmaster  can  claim  payment  in  full  be- 
fore other  creditors  are  paid  by  the  receiver.  While 
the  bank  is  liable  if  it  permits  the  postmaster  to  make 
an  improper  use  of  the  money,  yet,  if  the  bank  fails,  there 
is  no  "trust  fund"  which  must  be  paid  before  other  credit- 
ors,  unless  the  money  can  be  followed  into  the  hands  of  the 
receiver.  If  the  bank  has  given  security  for  the  deposit 
the  security  can  be  sold  and  the  Government  make  a 
claim  also  for  the  amount  of  the  deposit,  as  a  general 
creditor.  It  may  be  that  the  amount  realized  from  the 
security,  together  with  pro  rata  dividends  on  the  full 
amount  of  the  deposit,  will  more  than  pay  the  claim,  in 
which  event  any  excess  must  be  returned;  but  if  the 
security  does  not  bring  sufficient  to  pay  the  claim,  for 
the  balance,  the  Government,  like  any  other  creditor, 
must  rely  upon  the  dividends  for  payment.  And  the 
United  States  is  not  a  preferred  creditor  on  any  claim 
it  may  have.  Cook  Co.  Nat'l  Bank  v.  U.  S.,  107  U.  S., 
445.  But  a  lien  attaches  on  all  the  assets  of  a  national 
bank  until  the  circulating  notes  are  paid  or  provided  for. 

If  the  postmaster  settles  with  the  government  he  has 
himself  a  claim  against  the  bank  and  in  that  event,  being 
himself  a  creditor  of  the  bank,  he  could  offset  this  claim 
against  any  debt  he  personally  owed  the  bank.  Until 
he  has  settled  with  the  Post  Office  Department,  however, 
the  United  States  has  the  right  to  the  dividends  on  the 
deposit. 

Note  that  this  section  deals  with  postmasters  within 
a  county  where  there  are  no  designated  depositaries, 
treasurers  of  mints,  or  Treasurer  or  assistant  treasurers 
of  the  United  States.  On  these  deposits  the  postmaster 


SEC.  34  23 

and  every  other  person  is  forbidden  to  demand  or  receive 
interest. 

34.  The  only  other  sections  of  the  Revised   Statutes 
which  it  is  necessary  for  us  to  notice  here,  as  relating 
to  public  moneys  of  the  United  States,  are  Sections  4046, 
5488  and  5497 : 

Penalty  for  Misapplication  of  Money  Order  Funds — 
Sec.  4046: 

"Every  postmaster,  assistant,  clerk,  or  other  person  employed  in 
or  connected  with  the  business  or  operations  of  any  money-order 
office  who  converts  to  his  own  use,  in  any  way  whatever,  or  loans, 
or  deposits  in  any  bank,  except  as  authorized  by  this  Title,  or  ex- 
changes for  other  funds,  any  portion  of  the  money-order  funds, 
shall  be  deemed  guilty  of  embezzlement,  and  any  such  person,  as 
well  as  every  other  person  advising  or  participating  therein,  shall, 
for  every  such  offense,  be  imprisoned  for  not  less  than  six  months 
nor  more  than  ten  years,  and  be  fined  in  a  sum  equal  to  the  amount 
embezzled ;  and  any  failure  to  pay  over  or  produce  any  money-order 
funds  intrusted  to  such  person  shall  be  taken  to  be  prima  facie 
evidence  of  embezzlement ;  and  upon  the  trial  of  any  indictment 
against  any  person  for  such  embezzlement  it  shall  be  prima  facie 
evidence  of  a  balance  against  him  to  produce  a  transcript  from  the 
money-order  account  books  of  the  Sixth  Auditor.  But  nothing 
herein  contained  shall  be  construed  to  prohibit  any  postmaster  de- 
positing, under  the  direction  of  the  Postmaster-General,  in  a  national 
bank  designated  by  the  Secretary  of  the  Treasury  for  that  purpose, 
to  his  own  credit  as  postmaster,  any  money-order  or  other  funds 
in  his  charge,  nor  prevent  his  negotiating  drafts  or  other  evidences 
of  debt  through  such  bank,  or  through  United  States  disbursing 
officer,  or  otherwise,  when  instructed  or  required  to  do  so  by  the 
Postmaster-General  for  the  purpose  of  remitting  surplus  money- 
order  funds  from  one  post-office  to  another,  to  be  used  in  payment 
of  money-orders.  Disbursing  officers  of  the  United  States  shall  issue, 
under  regulations  to  be  prescribed  by  the  Secretary  of  the  Treasury, 
duplicates  of  lost  checks  drawn  by  them  in  favor  of  any  postmaster 
on  account  of  money-order  or  other  public  funds  received  by  them 
from  some  other  postmaster." 

35.  Unauthorized  Deposit  of  Public  Money — Sec.  5488. 

"Every  disbursing  officer  of  the  United  States  who  deposits  any 
public  money  intrusted  to  him  in  any  place  or  in  any  man- 
ner, except  as  authorized  by  law,  or  converts  to  his  own  use  in 
any  way  whatever,  or  loans  with  or  without  interest,  or  for  any 
purpose  not  prescribed  by  law  withdraws  from  the  Treasurer  or 
any  assistant  treasurer,  or  any  authorized  depositary,  or  for  any 


24  SEC.  35a 

purpose  not  prescribed  by  law  transfers  or  applies  any  portion  of 
the  public  money  intrusted  to  him,  is,  in  every  such  act,  deemed 
guilty  of  an  embezzlement  of  the  money  so  deposited,  converted, 
loaned,  withdrawn,  transferred,  or  applied;  and  shall  be  punished 
by  imprisonment  with  hard  labor  for  a  term  not  less  than  one  year 
nor  more  than  ten  years,  or  by  a  fine  of  not  more  than  the  amount 
embezzled  or  less  than  one  thousand  dollars,  or  by  both  such  fine 
and  imprisonment. 

35a.  Unauthorized  Receipt  or  Use  of  Public  Money — 
Sec.  5497: 

"Every  banker,  broker,  or  other  person  not  an  authorized  depositary 
of  public  moneys,  who  knowingly  receives  from  any  disbursing 
officer,  or  collector  of  internal  revenue,  or  other  agent  of  the  United 
States,  any  public  money  on  deposit,  or  by  way  of  loan  or  accom- 
modation, with  or  without  interest,  or  otherwise  than  in  payment 
of  a  debt  against  the  United  States,  or  who  uses,  transfers,  con- 
verts, appropriates,  or  applies  any  portion  of  the  public  money  for 
any  purpose  not  prescribed  by  law,  and  every  president,  cashier, 
teller,  director,  or  other  officer  of  any  bank  or  banking  association, 
who  violates  any  of  the  provisions  of  this  section,  is  guilty  of  an 
act  of  embezzlement  of  the  public  money  so  deposited,  loaned, 
transferred,  used,  converted,  appropriated,  or  applied,  and  shall  be 
punished  as  prescribed  in  section  fifty-four  hundred  and  eighty- 
eight." 

36.  Trust  Funds — Generally  an  executor,  administra- 
tor, guardian,  etc.,  has  authority  to  deposit  funds  in  bank, 
temporarily,  awaiting  investment  or  order  of  court,  and 
if  he  uses  care  in  selecting  the  bank  he  will  not  be  per- 
sonally liable  in  case  the  bank  fails.  Statutes  relating 
to  the  particular  office  should  always  be  examined  and 
closely  followed.  Where  a  bank  rightfully  received 
such  deposits,  as  has  been  said  before,  while  the  depositor 
may  be  a  trustee,  as  between  the  bank  and  the  depositor 
the  fund  is  not  a  trust  fund  but  simply  an  amount  due 
a  general  creditor.  No  one  has  a  legal  right  to  the  de- 
posit but  the  trustee,  administrator,  executor,  guardian, 
etc.,  who  rightfully  deposited  same.  These  hold  the 
legal  title  for  the  benefit  of  those  whom  they  represent. 
Where  an  administrator,  executor,  guardian,  trustee,  or 
any  person  acting  in  a  representative  capacity,  deposits 


SEC.  36  25 

funds  which  are  not  his  own,  but  which  belong  to  the 
person,  or  body  of  persons  whom,  or  the  estate  which  he 
represents,  he  should,  to  protect  himself  (and  the  bank 
should  require  for  its  protection  that  he  do  so),  deposit 
the  money,  not  in  his  individual  account,  but  in  an  ac- 
count designated  as  the  account  of  the  person,  body  of 
persons  or  estate  represented.  For  example,  if  John 
Smith  is  executor  of  the  Estate  of  James  Smith,  the 
money  should  be  deposited  in  an  account  designated 
"Estate  of  James  Smith,  John  Smith  Ex."  "John  Smith 
Ex.  of  the  Estate  of  James  Smith"  would  do,  but  the 
other  is  better.  If  John  Smith  represent  James  Smith  as 
trustee,  guardian,  agent,  attorney,  receiver,  or  otherwise, 
the  same  rule  should  be  followed. 

While  it  has  been  held  that  the  addition  of  the  word 
trustee,  agent,  etc.,  would  not  in  itself  give  a  bank  notice, 
upon  receiving  a  deposit  for  credit  to  such  account,  that 
the  money  is  a  trust  fund,  it  is  a  general  principle  of  the 
law  of  trusts  that  a  trust  fund,  if  misappropriated,  can  be 
traced  and  followed  into  the  hands  of  another.  In  Mis- 
souri it  is  held  that  the  addition  is  simply  a  description 
of  the  person.  In  better  considered  cases,  however,  it 
is  held  that  the  word  "trustee"  is  not  meaningless,  and 
that  the  bank  is  put  upon  notice  that  the  deposit  is  not 
individual  money  of  the  depositor,  especially  where  the 
depositor  keeps  an  individual  account  also.  One  case 
holds  that  the  word  is  a  description  of  the  fund  deposited. 
The  bank  should  require  information  which  will  enable 
it  to  determine  whether  the  money  is  the  property  of  the 
person  deposited  or  of  some  one  whom  he  represents. 
Having  received  the  deposit  it  must  pay  to  the  one  whom 
and  upon  order  drawn  in  accordance  with,  the  under- 
standing had  when  the  deposit  was  made.  This,  how- 
ever, will  not  relieve  the  bank  from  liability  where  it 
should  have  used  reasonable  care  at  least  to  ascertain  the 


26  SEC.  36 

facts.  Where  an  executor,  administrator,  guardian  or 
committee,  etc.,  is  appointed,  evidence  of  the  appoint- 
ment should  be  submitted  to  the  bank.  Where  the  au- 
thority is  given  by  a  court,  the  appointment  or  a  copy, 
certified  by  the  clerk  of  the  court,  is  the  best  evidence. 
Where  it  is  an  officer  of  a  corporation  or  committee  of 
some  kind,  some  official,  written  direction  from  the  cor- 
poration or  society  represented  should  be  filed  with  the 
bank,  showing  to  whom  the  money  belongs  and  who  has 
authority  to  withdraw  the  same.  The  bank  is  still  more 
in  peril  when  making  payment  on  such  accounts.  See 
Sec.  179.  It  should  not  pay  from  such  account  on  the  in- 
dividual check  of  the  depositor,  with  the  understanding 
that  he  will  make  it  good;  for,  even  though  he  owe  the 
bank  on  his  individual  account,  any  deposit  he  may  make 
thereafter  will  have  to  be  applied  in  restoring  the  amount 
wrongfully  withdrawn  and  cannot  be  applied  against  his 
debt.  If  A  have  an  account  under  his  name,  A,  and  an- 
other account  "A,  Trustee,"  and  he  give  a  check  to  C 
drawn  against  account  "A,  Trustee,"  the  bank  must  pay 
the  check,  even  if  it  be  drawn  for  payment  of  an  indi- 
vidual debt  of  A's,  if  the  bank  does  not  know  it  is  an  in- 
dividual debt ;  but  if  the  bank  paid  directly  to  A  when  it 
knew  A  was  using  funds  of  his  trust  for  his  private  pur- 
pose, or  accepted  a  check  for  A's  indebtedness  to  the 
bank,  the  bank  would  be  liable.  If  "A,  Trustee,"  draw  a 
check  against  the  account,  payable  to  "A,"  transferring 
the  amount  of  the  check  to  A's  individual  account,  with- 
out the  bank's  having  knowledge  of  a  wrong,  the  bank 
would  have  to  honor  the  check.  While  a  mere  reason  to 
believe  depositor  is  misapplying  trust  funds  cannot  make 
a  bank  liable,  the  trend  of  decisions  is  toward  demanding 
of  the  bank  more  care  in  informing  itself  when  suspicious 
circumstances  attend  checking  against  funds  of  which  the 
depositor  is  trustee.  Union  Stock  Yards  Nat'l  Bank  v.  Gil- 


SEC.  36  27 

lespie,  137  U.  S.,  411;  Nat'l  Bank  v.  Insurance  Co.,  104 
U.  S,  54- 

A  late  case  is  Havana  Central  R.  R.  Co.  v.  Knicker- 
bocker Trust  Co.,  119  N.  Y.  S.,  1035.  The  treasurer  had 
drawn  a  check  against  the  account  as  treasurer,  payable 
to  his  own  order,  and  deposited  it  in  his  individual  ac- 
count. The  bank  was  held  to  have  notice  that  he  was 
using  the  company's  money. 


28  SEC.  37 


CHAPTER  III. 

MAKING,  RECEIVING  AND  KEEPING  THE 

DEPOSITS. 

• 

37.  To  Whom  Made — Care  should  be  exercised  by  de- 
positors when  leaving  their  money  at  the  bank.     The 
broad  statement  is  made  in  one  of  the  books  that  money 
paid  to  anyone  behind  the  counter  will  bind  the  bank. 
While  it  is  true  that  money  deposited  with  one  to  whom 
it  has  been  the  custom  to  pay  is  payment  to  the  bank, 
and  while  the  president  and  cashier  are  generally  au- 
thorized  to   receive   deposits,   and   acceptance   by   them 
would  bind  the  bank,  yet  where  there  is  a  receiving  teller 
it  is  safest  to  deposit  with  no  one  else.     If  a  deposit  is 
made  with  one  not  authorized  to  receive  it,  the  person  to 
whom  it  is  paid  will  be  regarded  as  the  agent  of  the  de- 
positor and  not  as  the  agent  of  the  bank,  and  if  the 
money  is  misappropriated  it  will  be  the  depositor's  loss. 
Of  course  if  the  party  to  whom  it  is  paid  sees  that  it 
reaches  the  proper  place  in  the  bank,  then  the  bank  is 
bound.     Deposits  should  always  be  made  in  the  banking 
room. 

38.  Pass  Books — Entries — The  bank  usually  furnishes 
depositors  with  a  book,  called  a  bank  book,  or  pass  book. 
On  making  a  deposit  the  depositor  enters  upon  a  slip 
the  various  items  and  hands  the  deposit,  the  slip  and  the 
book  to  the  officer,  who,  after  verifying  the  deposit,  en- 
ters the  amount  in  the  pass  book. 

38a.  The  rule  once  was  that  the  entry  made  by  the 
officer  of  the  bank  was  binding  upon  the  bank,  but  not  on 
the  depositor,  if  made  at  the  same  time  that  the  deposit 


SEC.  38b  29 

was  made.  It  was  not  binding  upon  the  bank  if  the  book 
was  afterwards  written  up.  Now,  however,  the  general 
rule  seems  to  be  that  it  is  the  amount  actually  deposited 
that  the  bank  is  liable  for  and  the  fact  as  to  what  the 
actual  amount  was  may  be  proved  by  evidence  other  than 
the  pass  book  and  deposit  slip,  though  these  would  be 
evidence  of  a  high  character.  It  is  not  even  necessary 
that  there  should  be  a  ticket  made  out  or  an  entry  in  the 
pass  book,  if  it  can  be  proved  that  the  deposit  was  actual- 
ly made ;  but  the  bank  should  always  require  the  deposit 
slip  and  make  the  entry.  No  by-law  of  the  bank  can 
bind  a  depositor  to  accept  as  correct  the  amount  entered 
by  the  teller,  or  relieve  the  bank  from  liability  for  a  de- 
posit actually  received  by  the  bank  without  a  deposit  slip 
or  entry  in  the  pass  book.  The  amount  shown  by  a  de- 
posit slip  and  by  an  entry  in  the  pass  book  would  be  pre- 
sumed to  be  correct  until  shown  to  be  incorrect,  but  evi- 
dence can  be  introduced  to  show  that  either  the  bank  or 
the  depositor  has  made  an  error.  First  Nat'l  Bank  v. 
Whitman,  94  U.  S.,  343;  Schwartz  v.  Bank,  116  N.  Y.  S., 
701. 

38b.  The  pass  book  held  by  a  depositor  is  evidence  of 
his  deposit,  but  it  is  not  negotiable.  The  amount  as 
shown  by  the  pass  book  cannot  be  transferred  to  another 
by  endorsement  (the  writing  of  depositor's  name  on) 
and  delivery  of  the  book  merely. 

And  the  assignment  of  a  deposit  slip  does  not  in  itself 
give  the  one  to  whom  it  is  assigned  the  property  in  the 
deposit.  Talcot  v.  First  Nat'l  Bank,  53  Kansas,  480. 

38c.  When  a  deposit  is  made  by  a  depositor  who  has 
not  his  pass  book,  a  duplicate  deposit  slip  should  be  made 
out,  marked  "Duplicate,"  signed  by  the  teller  and  de- 
livered to  the  depositor  as  evidence  of  the  deposit  made. 
This  slip  is  not  negotiable.  If  the  amount  is  raised  the 
alteration  constitutes  a  forgery. 


30  SEC.  38d 

38d.  Balance  and  Return  of  Pass  Book — Where  a  pass 
book  has  been  balanced  by  the  bank  and  returned,  with 
paid  checks,  to  the  depositor,  the  rule  as  to  how  soon 
after  the  return  the  depositor  must  report  any  error  or 
forgery  to  the  bank  is  not  settled,  except  that  the  error 
must  be  reported  "within  a  reasonable  time."  In  New 
York,  where  there  has  been  a  forgery  the  statute  gives 
the  depositor  one  year,  after  return  of  the  paid  check  to 
him,  within  which  to  notify  the  bank;  in  South  Dakota 
three  months  is  the  limit.  What  is  a  reasonable  time 
within  the  balance  as  stated  by  the  bank,  upon  the  return 
of  the  pass  book,  must  be  objected  to,  will  depend  upon 
all  the  circumstances  surrounding  the  return  of  the  book 
and  the  discovery  of  the  error.  Ten  days,  a  month,  and 
under  some  circumstances  even  six  months  would  not  be 
unreasonable.  The  question  is  whether  there  has  been 
diligent  and  careful  verification  made  of  the  book  and 
vouchers  when  returned.  In  New  York  and  in  Missouri 
it  has  been  held  that  unless  the  bank  has  been  damaged 
by  the  depositor's  delay  in  discovering  the  error  the  de- 
positor ought  not  to  have  to  suffer  the  loss,  even  if  the 
discovery  is  made  a  long  time  after,  and  it  might  seem  to 
be  justice  that  the  depositor  should  not  be  punished  for 
not  discovering  the  error,  so  long  as  the  bank  has  not 
lost  by  his  delay.  In  the  United  States  Courts,  however, 
the  rule  is  that  the  bank  will  be  presumed  to  have  been 
damaged  by  the  depositor's  delay.  But  the  presumption 
can  be  proved  to  be  wrong.  Where  a  depositor  is  prompt 
in  verifying  the  bank's  statement  of  account  it  is  gen- 
erally possible  to  correct  an  error.  On  the  other  hand, 
if  circumstances  require  a  speedy  verification,  the  de- 
positor certainly  ought  to  be  held  for  any  loss  caused  by 
his  delay. 

If  A,  being  a  depositor  in  bank,  entrusts  the  matter  of 
verifying  the  bank's  statement  as  to  his  balance  to  his 


SEC.  38d  31 

clerk,  X,  and  X,  who  has  himself  forged  or  raised  checks 
of  A's,  fails  to  report  the  difference  in  the  balance  as 
stated  by  the  bank  and  the  true  amount  due,  should  the 
depositor  be  bound  by  the  bank's  statement  of  account? 
A  might  not  look  into  the  matter  of  his  bank  balance,  or 
examine  the  paid  checks,  for  years,  and  perhaps  might 
learn  by  some  other  incident,  that  X  at  one  time  forged 
or  raised  checks.  The  general  law  of  agency,  that  the 
knowledge  of  the  agent  is  imputed  to  the  principal  would 
require  a  holding  that  X  knowing  of  the  forgery,  A 
should  be  bound  by  X's  knowledge.  It  could  hardly  be 
expected  that  X  would  report  his  own  crime.  In  such 
cases  in  Pennsylvania,  Massachusetts,  Alabama  and,  it 
seems,  in  New  York,  the  depositor  will  be  bound  unless 
the  bank  is  notified  of  the  forgery  within  a  reasonable 
time.  In  Missouri  and  Maryland  the  rule  is  that  the 
principal  can  recover  from  the  bank,  in  such  case,  even  a 
long  time  after  the  forgery,  where  the  examination  of 
the  book  upon  its  return  by  the  bank  was  made  by  the 
one  who  committed  the  forgery.  No  reason  appears 
why  the  principal  should  not  stand  the  loss  for  such  a 
wrongful  act  of  his  agent  the  same  as  he  would  for  any 
other  wrongful  act  of  the  agent  performed  in  the  scope 
of  his  authority,  and  the  bank  should  not  be  called  upon 
to  stand  a  loss  where  not  notified  within  a  reasonable 
time.  And  doubtless  the  reasonable  time  allowed  the  de- 
positor would  be  extended  a  little  in  view  of  the  circum- 
stances. In  Illinois  six  months  was  held  a  reasonable 
time,  and  the  principal  was  allowed  to  recover  where  his 
agent  acquiesced  in  the  bank's  statement  of  account, 
which  included  payment  of  forged  check,  even  though 
the  book  had  been  several  times  balanced.  The  Court 
said  the  account  was  stated  for  the  depositor's  protec- 
tion, not  for  the  bank's.  A  recent  case  is  National  Dredg- 


32  SEC.  38e 

ing  Co.  v.  President,  etc.,  Farmers  Bank,  69  Atlantic  Re- 
porter, 607.  A  Delaware  case. 

386.  Examination  of  Books  of  Bank — It  has  been  held 
that  the  officers  of  the  bank,  having  charge  of  the  books, 
are  considered  the  agents  of  both  parties — the  bank  and 
the  depositor — and  that  the  depositor  is  entitled  to 
examine  and  the  bank  bound  to  produce  the  books  of  the 
institution  on  all  proper  occasions.  While  there  seem 
to  be  a  proper  occasion  for  a  depositor  to  request  an 
examination  of  his  own  account  upon  any  controversy 
arising  over  his  account  with  the  bank,  the  courts  would 
doubtless  deny  a  depositor  the  right  to  examine  into  the 
books  of  the  bank  generally.  While  it  would  probably 
be  just,  both  to  the  depositor  and  the  holder  of  a  check, 
for  the  bank  to  give  the  state  of  the  depositor's  account 
when  a  check  for  more  than  his  balance  is  presented,  and 
payment  refused  because  there  are  not  sufficient  funds, 
it  is  doubtful  whether  a  bank  has  the  right  to  disclose  to 
any  third  party  the  condition  of  a  depositor's  account, 
without  making  itself  liable  to  the  depositor,  though  in 
Kansas  the  court  has  held  that  the  bank  must  give  in- 
formation as  to  the  state  of  a  depositor's  account  when 
testifying  before  the  grand  jury.  In  re  Davis,  68  Kansas, 
791.  Of  course,  if  a  creditor  of  the  depositor  brings  at- 
tachment proceedings,  the  bank  must  disclose  the  amount 
due  the  depositor.  And  if  summoned  as  a  witness,  an 
officer  of  the  bank  would  have  to  disclose  the  state  of  a 
depositor's  account,  if  the  fact  were  otherwise  relevant 
to  the  issue.  He  could  not  refuse  to  disclose  it  on  the 
ground  that  it  was  a  confidential  communication.  See 
Sec.  109. 

39.  Who  is  Entitled  to  Deposit — When  A  deposits 
money  in  bank  to  his  account  the  law  will  presume  that 
it  is  A's  money  and  the  bank  cannot  deny  his  ownership 
and  appropriate  the  money  to  the  payment  of  the  obliga- 


SEC.  39a  33 

tion  of  some  one  else  to  it,  or  transfer  it  to  another  ac- 
count because  it  claims  the  money  belongs  to  somebody 
else.  As  between  the  depositor  and  the  bank  the  former 
is  the  true  owner  until  the  bank  has  legal  authority  to 
pay  to  someone  else.  If  a  third  party  claims  the  money, 
such  claimant  should  use  the  proper  legal  method  of  en- 
forcing his  right,  and  after  notice  that  the  money  is  ad- 
versely claimed  the  bank  should  not  use  any  wrongful 
method  to  prevent  the  rightful  owner  from  recovering 
his  money,  but  if  the  claimant  does  not  use  reasonable 
diligence  in  proving  his  right,  the  bank  would  be  justified 
in  paying  the  money  upon  the  order  of  the  depositor.  Of 
course,  if  the  bank  has  actual  knowledge  that  the  money 
belongs  to  someone  else  it  will  be  liable  to  the  true  owner 
if  it  pays  to  the  depositor.  If  X  deposits  money  in  bank 
and  before  X  draws  it  out  A  notifies  the  bank  that  the 
money  belongs  to  him  (A)  and  offers  to  indemnify  the 
bank  if  it  loses  anything  by  refusing  to  pay  X,  the  bank 
will  be  liable  to  A  if  it  pays  to  X  and  A  establishes  his 
right  to  the  money.  The  true  owner  of  a  deposit  is 
always  entitled  to  it.  Stair  v.  York  Nat'l  Bank,  55  Pa. 
St.,  364. 

3Qa.  If  A  deposits  money  in  bank  under  the  name  B, 
under  an  agreement  with  the  bank  that  it  will  pay  out 
the  money  on  his  checks  signed  "B,"  he  can  withdraw 
it  on  checks  so  signed.  The  bank  will  be  discharged  so 
long  as  it  pays  checks  according  to  the  contract  and  so 
long  as  it  has  no  knowledge  that  the  money  belongs  to 
some  one  else.  Davis  v.  Lenawee  Co.  Sav.  Bk.,  53 
Mich.,  at  166. 

If  A,  without  any  agreement  with  the  bank,  deposits 
money  in  B's  name,  and  it  is  for  a  legal  purpose  and  for 
the  benefit  of  B,  even  though  B  had  no  knowledge  that 
the  deposit  was  being  made,  B  would  have  the  right  in 
most  States  to  claim  it,  when  he  learned  of  it.  If  the 


34  SEC.  39b 

bank  paid  to  A  or  any  one  other  than  B  so  long  as  it 
stood  in  B's  name,  payment  would  be  at  its  peril.  If  the 
bank  paid  B  under  such  circumstances  it  would  be  dis- 
charged. In  some  states  notice  must  be  given  to  B  to 
entitle  him  to  the  deposit,  as  between  B  and  A  or  A's 
representatives  or  creditors.  If,  however,  A  deposits  in 
B's  name,  in  order  to  hide  his  assets  from' his  creditors, 
or  to  escape  taxation,  or  for  any  other  illegal  purpose, 
B  would  not  have  any  right  to  it.  See  chapter  on  Gifts. 
39b.  If  A  deposits  in  bank  money  belonging  to  B,  no 
matter  under  what  name,  B  is  entitled  to  the  deposit  and 
can  recover  same,  and  if  A  is  indebted  to  the  bank  it  can- 
not use  B's  money  to  pay  A's  debt.  If,  however,  B  knows 
that  A  has  so  deposited  the  money  and  consents,  B 
would  be  a  general  creditor  in  case  the  bank  failed.  If 
A  so  deposits  without  the  consent  of  B  a  trust  fund  is 
created.  There  is  a  trust  relationship  between  A  and  B. 
If  the  bank  does  not  know  of  A's  wrong,  the  money 
cannot  be  recovered  by  B  unless  it  can  be  traced.  If 
the  bank  knew  of  A's  wrong  it  will  be  liable  to  B  whether 
the  money  can  be  traced  or  not,  in  full.  If  the  bank  is 
insolvent,  however,  the  money  cannot  be  recovered  by  B, 
even  though  the  bank  knew  of  A's  wrong,  unless  the 
money  can  be  traced.  It  would  be  an  injustice  to  other 
creditors.  A  would  be  liable  personally  to  B.  If  A 
steals  from  B  any  article  which  can  be  identified,  B  can 
recover  the  stolen  goods  in  the  hands  of  any  person. 
Money,  however,  cannot  be  identified  and,  therefore,  if 
it  passes  out  of  the  hands  of  the  thief  it  is  gone.  In 
case  of  a  bank  deposit,  so  long  as  it  has  no  notice  of 
a  wrong  the  bank  is  not  concerned  as  to  where  the  de- 
positor obtained  the  money  and  is  liable  to  him  only 
until  the  true  owner  proves  his  right,  but  when  he  does 
prove  that  it  was  his  money  the  bank  owes  it  to  him  and 
not  to  A.  If  it  pays  it  out  to  A  before  it  has  any  notice 


SEC.  39c  35 

of  A's  wrong  it  is  discharged  and  is  not  liable  to  B.  In 
some  states  money  won  at  gambling,  if  deposited  by  the 
winner,  can  be  recovered  by  the  loser  as  his  money  and  a 
check  given  for  a  gambling  debt  in  those  states  is  void, 
and  if  paid  by  the  bank  the  bank  can  be  called  upon  to 
make  good  to  the  depositor.  In  most  states,  however, 
the  bank  is  not  held  to  the  same  responsibility,  is  not 
concerned  with  the  source  of  the  deposit  or  the  object 
of  the  order  drawn  on  it,  so  long  as  it  receives  and  pays 
without  notice.  Wright  v.  Stewart,  130  Fed.,  914;  Arm- 
strong v.  Bank,  133  U.  S.,  433- 

39c.  Deposit  on  Condition. — Where  money  is  deposited 
under  an  agreement  that  it  is  to  be  paid  only  on  fulfill- 
ment of  a  condition,  the  bank  cannot  pay  until  that  con- 
dition has  been  complied  with.  Insurance  Co.  v.  Trust 
Co.,  115  N.  Y.  S.,  503.  If  A  makes  the  deposit  to  be  paid 
to  B  when  B  has  complied  with  a  condition ,  if  B  fails  to 
comply  with  the  condition,  the  money  should  be  re- 
turned to  A  upon  his  demand.  Bank  v.  Harding,  I  Kan. 
App.,  389.  And  payment  to  A  discharges  the  bank  from 
further  liability.  McGorray  v.  Loan  Society,  131  Cal., 
321 ;  63  Pac.,  479.  But  where  B  has  met  the  condition  the 
money  becomes  his  and,  in  the  absence  of  a  different  un- 
derstanding, B  stands  in  the  relation  of  a  depositor  to 
the  bank.  (Mo.)  in  S.  W.,  574. 

40.  Certificates  of  Deposit — Where  it  is  desired  to 
make  a  time  deposit  or  only  a  single  deposit  the  bank 
usually,  in  consideration  of  being  assured  that  it  will 
have  the  use  of  the  money  for  a  stated  period,  will  allow 
interest.  Such  deposits  are  not  entered  on  the  general 
or  checking  account  of  the  customer  and  are  carried  in  a 
"Certificate  of  deposit"  account.  As  evidence  of  such 
deposit  a  certificate  is  issued.  This  certificate  is  called 
a  certificate  of  deposit.  A  certificate  pf  deposit,  there- 
fore, is  a  paper  issued  by  a  bank  acknowledging  receipt 


36  SEC.  41 

of  money  deposited.  A  certificate  of  deposit  can  be 
used  as  collateral,  or  it  can  be  transferred  in  most  in- 
stances by  endorsement,  while  a  pass  book  cannot. 

Most  certificates  of  deposit  contain  a  promise  to  repay, 
on  demand,  or  at  a  certain  future  date,  or  upon  return  of 
the  certificate  properly  endorsed.  A  common  clause  in 
the  certificates  is  that  interest  will  be  paid  at  a  certain 
rate,  if  the  money  is  left  a  specificed  time. 

41.  A    Negotiable    Instrument — In    their   usual    form, 
acknowledging  receipt  and  promising  to  repay  to  the  de- 
positor "or  order,"  or  some  other  person  "or  order,"  "or 
bearer,"  these  certificates  have  generally  been  regarded 
as  the  negotiable  promissory  notes  of  the  issuing  bank. 
In  some  states,  including  Pennsylvania  and  Massachu- 
setts, a  certificate  of  deposit  is  not  regarded  as  negotiable. 

To  be  negotiable  an  instrument  must  comply  with  the 
requisites  for  negotiability  as  provided  by  the  laws  of 
the  state.  It  must  contain  an  unconditional  promise  to 
repay,  to  bearer,  or  to  order,  a  sum  certain  in  money,  on 
demand  or  at  a  time  certain,  the  same  as  any  other 
negotiable  instrument.  Therefore,  if  a  bank  issues  to 
A  a  certificate  stating  that  "This  is  to  certify  that  A  has 
to  his  credit  $500,"  this  is  not  a  certificate  of  deposit.  It 
is  evidence  of  the  bank's  indebtedness  to  A. 

42.  In  those  states  where  a  certificate  of  deposit  is  re- 
garded as  the  negotiable  promissory  note  of  the  bank, 
the  bank  cannot  issue  such  certificate  if  it  is  prohibited 
from  issuing  promissory  notes. 

43.  As  the  certificate  usually  recites  that  it  will  pay 
"on  return"  of  the  certificate,  it  is  generally  held  that  the 
certificate  must  be  presented  at  the  bank,  though  in  one 
or  two  instances  it  has  been  held  that  the  bank  must 
find  the  holder  and  pay  him.     It  is  a  general  principle  of 
law  that  the  debtor  must  seek  the  creditor.     But  it  would 
seem  that  the  certificate  ought  to  be  interpreted  to  mean 


SEC.  44  37 

what  it  says  on  its  face,  and  as  the  bank  promises  to  pay 
"on  return,"  the  bank  is  the  place  where  the  certificate 
should  be  payable.  The  certificate  should  be  sur- 
rendered upon  payment. 

44.  The  statement  in  the  books  that  a  certificate  of  de- 
posit need  not  be  endorsed  to  be  negotiated  is  misleading 
and  is  based  on  a  case  which  decided  that  if  A  deposits 
$100  belonging  to  B,  and  the  bank,  knowing  it  is  B's 
money,  issues  a  certificate  in  A's  name,  B  can  recover  the 
money  from  the  bank,  by  suit,  without  A's  endorsement 
on   the   certificate.     As   we   have   seen  before,   the   true 
owner  of  the  money  has  the  best  right  to  it,  no  matter 
in  whose  name  it  stands,  and  a  note,  check  or  other  evi- 
dence of  indebtedness  can  be  transferred  without  being 
endorsed,  but  where  a  certificate  is  properly  issued  pay- 
able to  A  or  order,  if  any  one  other  than  A  presented  the 
certificate  to  the  bank  without  the  endorsement  of  A 
thereon,  or  some  other  order  of  A  and  a  surrender  of  the 
certificate,  the  bank  would  run  the  risk  of  being  still 
liable   to  A  if  it  paid  without  A's   endorsement.     The 
same   rules  are   applicable   to   negotiable   certificates   of 
deposit  as  apply  to  other  negotiable  instruments. 

45.  If  A,  to  whom  a  certificate  of  deposit  for  $100  has 
been  issued,  endorses  the  certificate  and  then  loses  it, 
B  finds  it  and  transfers  it  to  C,  for  $100,  C  not  knowing 
of  B's  wrongful  possession,  C  will  be  a  bona  fide  holder 
for  value  and  the  bank  and  A  will  be  liable  to  C.     If  A 
proves  his  loss  of  the  certificate  the  bank  must  pay  what 
it  owes  to  him,  but  it  can  require  that  A  give  a  bond  to 
indemnify  the  bank  in  case  the  certificate  is  presented  by 
anyone  who   is   a   bona   fide   holder   for   value    without 
notice.    If  A  knows  that  B  has  found  the  certificate  and 
B  refuses  to  return  it,  A  should  sue  the  bank  for  pay- 
ment and  make  B  a  party  to  the  suit,  to  compel  him  to 
surrender  the  certificate  to  the  bank  and  to  pay  damages 


38  SEC.  46 

for  detaining  the  certificate.  The  amount  of  damages 
would  be  interest  at  the  legal  rate  from  time  demand  was 
made  until  judgment  is  obtained  and  paid.  If  the  cer- 
tificate has  not  been  endorsed  by  A,  or  is  past  due,  or  if 
it  is  in  a  state  where  such  certificate  is  non-negotiable, 
B  or  C  would  acquire  no  right  against  the  bank  and  the 
bank  could  not  require  a  bond  from  A,  as  the  bank  could 
not  be  harmed.  Citizens  National  Bank  v.  Brown,  45 
Ohio  State  Reports,  39.  If  B  found  it  and  forged  A's 
endorsement  and  the  bank  paid,  it  would  be  the  bank's 
loss.  Honig  v.  Pacific  Bank,  73  California,  464.  See 
Sec.  135. 

46.  When  Due — In  some  states  a  certificate  of  deposit 
payable   "on   demand,"  or  "on   return  of  certificate,"   is 
treated  as  due  as  soon  as  issued  and  no  demand  need  be 
made  before  suit  can  be  brought,   (California,  Georgia, 
Michigan,  Wisconsin  and  Texas),  and  the  statute  of  lim- 
itations begins  to  run  immediately  upon  its  issue. 

In  some  states  a  bona  fide  holder  for  value  (one  who 
gives  value  for  it  without  knowing  or  having  notice  of 
any  rights  of  others)  is  given  a  reasonable  time  to 
present  the  certificate  at  the  bank  for  payment.  If  he 
does  not  present  it  in  a  reasonable  time  he  will  be 
presumed  to  have  notice  that  the  certificate,  be- 
ing payable  on  demand,  is  overdue.  Meador  v.  Dollar 
Savings  Bank,  56  Ga.,  605.  But  in  most  states  the  cer- 
tificate payable  on  demand  is  not  due  until  it  has  been 
presented  with  demand  for  payment.  Suit  cannot  be 
brought  until  demand  has  been  made.  Therefore  the 
statute  of  limitations  does  not  commence  to  run  until 
demand,  and  where  the  certificate  is  regarded  as  negotia- 
ble, and  has  been  negotiated,  the  same  steps  should  be 
taken  to  protest  and  give  notice,  after  demand,  as  in  the 
case  of  a  note. 

47.  When  payable  on  a  fixed  date  or,  "day  certain,"  it  is 


SEC.  48  39 

not  due  until  that  date.  When  due,  the  certificate  should 
be  presented  and  payment  demanded,  as  the  certificate 
usually  states  that  it  will  be  paid  "on  return  of  cer- 
tificate." 

48.  In  New  York  it  has  been  held  that  if  a  certificate 
of  deposit  does  not  contain  a  promise  to  pay  it  is  only  a 
receipt.     In  other  states  it  is  held  that  a  promise  to  repay 
is  implied.     Where  the  certificate  complies  with  all  the 
requirements  of  negotiable  instruments,  nothing  outside 
of  what  is  shown  in  the  certificate  can  be  introduced  to 
deny  the  bank's  liability  to  one  to  whom  it  has  been  en- 
dorsed, unless  he  is  not  a  holder  in  good  faith,  for  value, 
before  maturity,  but  as  between  the  bank  and  the  one 
to  whom  the  certificate  is  issued,  the  certificate,  like  the 
entries  in  the  pass  book,  is  only  evidence  of  the  deposit. 

49.  Interest — Where  the  certificate  bears  interest,  "if 
left  for"  a  certain  time,  the  depositor  is  not  entitled  to  in- 
terest if  he  presents  the  certificate  and  receives  payment 
before  that  time  has  expired.    Where  payable  on  demand 
with  interest  it  bears  interest  till  paid.     Where  payable 
after  a  certain  time  and  that  time  has  expired,  and  the 
bank  has  not  paid,  the  interest  continues.     It  has  been 
held  in  North  Dakota  that  where  the  certificate  contains 
the  words — "No  interest  after  that  time,"  the  bank  will 
still  be  liable  for  interest  until  paid,  where  payment  has 
been  demanded  when  due  and  refused.     This  of  course 
should  be  so,  but  where  payment  has  not  been  demanded, 
the  bank  can   insist  upon  payment  when   due   and   can 
reduce   the    rate    of    interest  after    maturity    by    giving 
proper  notice.     Bank  v.  Harrison,  66  Pac.,  460  (N.  M.). 

49a.  Payment — A  certificate  of  deposit,  if  accepted  by 
a  creditor  of  the  holder,  is  not  payment  until  the  cer- 
tificate has  been  paid,  unless  the  creditor  agrees  that  it 
is  to  be  regarded  as  absolute  payment.  It  will  be  re- 


40  SEC.  50 

garded  as  payment  of  a  debt  due  the  bank  issuing  it. 

If  bank  A  sends  to  bank  B,  for  collection,  a  draft  drawn 
on  C,  with  instructions  to  send  its  draft  for  proceeds, 
and  bank  B  receives  from  C,  in  payment  of  the  draft,  a 
certificate  issued  by  it  to  C,  this  will  be  a  payment.  If 
bank  B,  after  collection,  sends  to  bank  A  its  draft  and 
then  bank  B  fails,  bank  A  will  be  a  general  creditor  of 
bank  B,  on  the  draft.  As  to  C,  the  draft  will  have  been 
paid. 

If  bank  A  sends  to  bank  B  draft  on  C  and  requests 
bank  B  to  collect  and  remit,  and  bank  B,  being  insolvent, 
accepts  a  certificate  of  deposit  from  C,  issued  by  itself, 
this  is  a  fraud,  and  it  has  been  held  that  in  such  case 
bank  A  would  be  a  preferred  creditor  entitled  to  pay- 
ment in  full  from  bank  B  when  bank  B  fails.  Bank  B 
should  have  accepted  cash  only  and  remitted  it.  That 
this  was  a  fraud  on  the  part  of  bank  B  is  undoubted.  If 
C  was  not  a  party  to  the  fraud  this  was  a  payment  by  C. 
But,  as  no  money  passed  to  bank  B,  there  was  no  trust 
fund  created  to  which  bank  A  could  be  entitled.  There 
was  no  money  to  trace.  If  bank  A  traced  what  was 
given  in  payment  for  the  draft,  it  found  the  certificate, 
which  was  an  obligation  of  the  bank  on  which  the  holder 
could  be  entitled  to  no  rights  superior  to  those  of  a  gen- 
eral creditor. 

50.  Loan — While  money  for  which  a  certificate  of  de- 
posit has  been  issued  is  for  most  purposes  considered  as  a 
deposit,  yet,  where  it  is  not  subject  to  being  demanded 
or  checked  out  at  will  by  the  depositor,  but  he  is  bound 
to  leave  it  for  a  certain  length  of  time,  does  it  become  a 
loan  of  money  to  the  bank?  If  the  depositor  has  the 
right  to  draw  the  money  out  when  he  pleases  it  is  a  de- 
posit, notwithstanding  the  fact  that  he  will  lose  interest 
if  he  does  not  leave  it  for  a  specified  time.  If  he  has  no 


SEC.  a  41 

legal  right  to  withdraw  before  a  stated  time  is  it  a  loan? 
It  is  true  every  deposit  is  in  effect  a  loan  to  the  bank, 
but  not  every  loan  is  a  deposit. 

There  is  conflict  in  the  authorities,  but  it  can  be 
gathered  from  the  decisions  that  the  mere  fact  that  an 
account  draws  interest  does  not  make  it  a  loan.  If  the 
depositor  has  the  right  to  check  against  the  account  it  is 
a  deposit.  See  cases  cited  following  Sec.  27.  Where 
a  certificate  of  deposit  is  payable  on  demand  the  holder 
has  the  right  to  the  money  at  any  time  that  he  demands 
it,  and  where  it  states  that  the  deposit  has  been  received 
and  is  subject  to  "interest  at  — %  if  left  for"  a  stated 
time,  this  does  not  take  away  the  depositor's  right  to 
withdraw  it  at  his  pleasure,  but  cuts  off  any  interest  if 
he  withdraws  it  before  the  time  stated.  When  it  is 
payable  at  a  fixed  time  it  is  the  same  as  the  promissory 
note  of  the  bank;  the  depositor  has  no  control  over  the 
fund  and  this  is  a  loan  of  money  to  the  bank.  The  dis- 
tinction between  a  loan  and  deposit  is  of  importance  for 
several  reasons: 

a.  By  some  statutes  public  officers,  and  by  others  trus- 
tees, executors,  etc.,  are  forbidden  to  loan  the  funds  in 
their  custody.     The  courts  of  Wisconsin,  South  Dakota, 
Oregon   and   Nebraska   have   held   that   when   a   public 
officer  deposits  money  in  bank,  even  though  he  receives 
interest  on  the  deposit,  this  is  not  a  loan  so  long  as  he 
has  the  right  to  check  out  the  money  at  will.    See  Sec.  27 

b.  The  national  bank  act  and  most  of  the  state  banking 
laws  prohibit  national  and  state  banks,  respectively,  from 
incurring  indebtedness  exceeding  their  respective  capi- 
tals, but  in  calculating  this  indebtedness  the  liability  for 
deposits  is  not  included.    Any  amount  due  to  a  national 
bank  not  a  reserve  agent,  or  to  a  state  bank,  private  bank, 
savings  bank  or  trust  company,   which   the   depositing 


42  SEC.  c 

bank  is  obliged  to  leave  for  a  specified  time  (i.  e.  which 
is  not  subject  to  payment  on  demand)  if  in  excess  of  the 
capital  of  the  bank,  would  be  a  violation  of  the  law.  As 
to  national  banks,  Section  5202  of  the  Revised  Statutes 
of  the  United  States  applies. 

c.  In  some  states  depositors  are  preferred  over  other 
creditors  in  case  of  the  failure  of  the  bank.  Therefore,  if 
bank  A  has  a  balance  in  bank  B,  if  the  balance  is  a  de- 
posit it  can  participate  with  depositors  before  other  credi- 
tors, while  if  it  is  a  loan  it  cannot  receive  any  dividends 
from  the  assets  of  the  failed  bank  until  the  depositors 
have  all  been  paid.  Of  course  if  a  transaction  is  really 
a  loan,  and  a  certificate  of  deposit  is  issued  by  the  bor- 
rower merely  to  make  it  appear  as  a  deposit,  this  is  a 
loan,  and  in  states  where  depositors  have  priority  over 
other  creditors,  the  bank  holding  such  a  certificate  would 
not  be  entitled  to  share  with  depositors.  Brown  v.  Shel- 
don State  Bank,  117  N.  W.,  289  (an  Iowa  case).  And 
where  shareholders  are  liable  for  deposits  they  cannot  be 
held  liable  on  such  a  transaction,  wrhich  is  a  loan  in  the 
guise  of  a  deposit.  State  Savings  Bank  v.  Foster,  118 
Mich.,  268. 

It  has  been  held  that  the  prohibition  against  a  na- 
tional bank  loaning  money  on  the  shares  of  its  own  capi- 
tal stock  as  security  likewise  prohibits  the  bank  from 
depositing  money  permanently  in  another  bank  and  tak- 
ing shares  of  its  own  stock  to  secure  the  deposit.  See 
National  Bank  of  South  Bend  v.  Lanier,  n  Wallace,  (U. 

so,  369. 

51.  Keeping  the  Deposit — As  we  have  seen,  a  bank  is 
indebted  to  the  depositor  for  money  he  deposits.  The 
money  becomes  the  property  of  the  bank.  If  stolen  or 
lost  after  delivery  to  the  bank  officer,  the  loss  falls  upon 
the  bank.  Therefore  the  bank  must  employ  proper 


SEC.  52  43 

means  to  safeguard  as  its  own  property  the  moneys  de- 
posited. In  consideration  of  the  liability  assumed  it  has 
the  use  of  the  money  so  long  as  the  depositor  leaves  it 
with  the  bank.  The  bank's  business  of  loaning  money 
produces  the  profit  which  compensates  it  for  the  accom- 
modation afforded  the  depositor.  But  while  the  money 
is  its  own,  the  law  protects  those  who  give  the  banks 
the  use  of  their  money  without  pecuniary  compensation, 
by  certain  regulations  of  the  banking  business,  by  causing 
periodical  examinations  of  condition  of  the  banks,  by 
providing  a  general  supervision  of  the  banks'  affairs  and, 
what  concerns  us  mostly  just  now,  by  requiring  the 
banks  to  maintain  a  reserve  of  actual  cash  in  their  vaults, 
to  meet  any  contingency  which  might  arise.  This  is 
called  "Lawful  Money  Reserve,"  or  "Reserve."  If  a 
bank  which  has  loans  paying  high  rates  of  interest  has 
only  a  small  portion  of  its  deposits  on  hand  in  cash  and 
a  run  is  started  on  the  bank,  if  the  loans  are  not  as 
liquidable  as  they  were  thought  to  be  profitable  it  will 
mean  ruin  to  both  the  bank  and  the  depositors.  Some 
of  the  reserve  the  banks  are  allowed  to  carry  on  deposit 
in  other  banks,  where  the  law  doubtless  "presumes"  it 
can  be  readily  obtained  in  an  emergency.  I  say  "pre- 
sumes," because  during  the  "Bankers'  Panic"  in  1907  the 
reserves  in  Central  Reserve  Cities,  especially  New  York, 
where  the  money  was  piled  up,  were  not  very  "readily 
obtainable"  by  the  depositing  banks  when  they  needed 
the  "Lawful  Money"  and  quite  a  few  had  to  close  their 
doors  for  lack  of  cash,  though  not  actually  insolvent. 

52.  Lawful  Money  Reserve  of  National  Banks — Sec- 
tion 5191  of  the  Revised  Statutes  of  the  United  States 
provides  that  every  national  banking  association  in  any 
of  the  following  cities:  Albany,  Baltimore,  Boston,  Cin- 
cinnati, Chicago,  Cleveland,  Detroit,  Louisville,  Mil- 


44  SEC.  53 

waukee,  New  Orleans,  New  York,  Philadelphia,  Pitts- 
burgh, St.  Louis,  San  Francisco  and  Washington,  shall 
at  all  times  have  on  hand,  in  lawful  money  of  the  United 
States,  an  amount  equal  to  at  least  twenty-five  per 
centum  (25%)  of  the  aggregate  amount  of  its  deposits. 

Every  national  banking  association  other  than  those 
in  the  cities  mentioned  must  at  all  times  have  on  hand, 
in  lawful  money  of  the  United  States,  an  amount  equal 
to  at  least  fifteen  per  centum  (15%)  of  the  aggregate 
amount  of  its  deposits. 

53.  Formerly   national   banks   were   required   to   keep 
reserve  against  circulating  notes  of  the  bank  outstand- 
ing, but  this  requirement  was  abolished  by  an  amend- 
ment of  the  law  in  1874.     Each  national  bank  is  required 
to  keep  on  deposit  with  the  Treasurer  of  the   United 
States  a  fund  equal  to  5%   of  circulating  notes  of  the 
bank,  and  the  amount  so  deposited  with  the  Treasurer, 
can  be  counted,  not  exceeding  5%  of  circulation,  as  part 
of  the  25%  or  15%,  respectively,  which  the  banks  must 
carry  as  reserve. 

54.  Section  14  of  the  Act  of  Congress  of  May  30,  1908, 
enacts  that  no  reserve  need  be  carried  as  against  "de- 
posits of  public  moneys  by  the  United  States  in  desig- 
nated depositories."     The  banks  must  furnish  security 
for  the  moneys  of  the  United  States  thus  received  and 
as  the  money  is  deposited  by  the  Treasury  Department 
to  place  it  in  circulation  where  required  to  meet  demands 
of  business,  to  compel  keeping  part  of  it  on  hand  in  cash 
would  defeat  the  object  for  which  the  money  was  placed 
in  the  banks. 

55.  Reserve  Cities — It  is  convenient  for  all  banks  to 
have  correspondents  in  the  larger  cities,  to  facilitate  the 
transfer  of  funds  and  for  other  beneficial  reasons.     All 
national  banks,  therefore,   keep  part  of  their  funds  in 


SEC.  56  45 

national  banks  in  the  cities  heretofore  mentioned.  These 
cities  are  known  as  "Reserve  Cities."  See  Sec.  52.  Of 
the  15%  which  every  national  banking  association  is 
required  to  keep  in  •  lawful  money  reserve,  three-fifths 
(9%  of  its  deposits)  may  consist  of  balances  due  the 
bank  from  national  banks  in  Reserve  Cities.  New  York, 
Chicago  and  St.  Louis  are  "Central  Reserve  Cities."  Of 
the  25%  reserve  required  to  be  kept  by  national  banks  in 
Reserve  Cities;  i.  e.,  Albany,  Baltimore,  Boston,  Cin- 
cinnati, Cleveland,  Detroit,  Louisville,  Milwaukee,  New 
Orleans,  Philadelphia,  Pittsburg,  San  Francisco  and 
Washington,  one-half  may  be  kept  in  cash  deposits  in  na- 
tional banks  in  "Central  Reserve  Cities,"  New  York, 
Chicago  and  St.  Louis. 

56.  Reserve  Agents — Each  bank  must  select  the  bank 
or  banks  in  the  reserve  city  wherein  it  desires  to  keep 
its  reserve  and  this  reserve  city  bank,  called  a  "Reserve 
Agent,"   must  be  approved  by  the   Comptroller  of  the 
Currency.     Form  of  making  application  for  appointment 
of,  or  change  in,  a  reserve  agent  will  be  furnished  by  the 
Comptroller   of   the    Currency.     All    national    banks    in 
"Central  Reserve  Cities"  must  keep  on  hand  in  lawful 
money  the  full  amount  of  25%  required  to  be  kept  by 
them. 

57.  What    May    be    Counted    as    Reserve — "Clearing 
House  Certificates,  representing  specie  or  lawful  money 
specially  deposited  for  the  purpose  (i.  e.  for  the  purpose 
of  receiving  the  clearing  house  certificate),  of  any  clear- 
ing house  association,  shall  also  be  deemed  to  be  lawful 
money  in  the  possession  of  any  association  belonging  to 
such    clearing    house,    holding    and    owning    such    cer- 
tificate."    Sec.  5192  Revised  Statutes  U.  S. 

It  has  been  noted  that  part  of  the  "Lawful   Money 
Reserve"    may   consist   of   balances    due    from    reserve 


46  SEC.  57 

agents ;  that  clearing  house  certificates  issued  for  money 
deposited  can  be  counted  as  reserve,  as  can  the  five  per 
cent,  redemption  fund  with  the  Treasurer  of  the  United 
States.  Otherwise  the  "Lawful  money  reserve"  must 
be  in  gold  coin,  gold  certificates,  gold  certificates  pay- 
able to  order,  legal  tender  notes,  silver  dollars,  silver 
certificates  and  fractional  silver  coin.  Nickels  and  cents 
cannot  be  counted,  nor  can  national  bank  notes. 


SEC.  58  47 

CHAPTER  IV. 
PAYMENT  OF  DEPOSITS. 

58.  Contract  Existing  Between  Bank  and  Depositor. — 

As  has  been  seen,  the  relation  of  the  bank  to  the  depos- 
itor is  that  of  debtor  to  creditor,  and  that  there  exists 
between  the  bank  and  the  depositor  a  contract. 

Unless  there  has  been  some  other  agreement  or  under- 
standing, the  contract  existing  between  the  bank  and  a 
general  depositor  is  that  the  bank,  having  received  de- 
posits, will  honor  the  checks  or  orders  of  the  depositor 
on  presentation,  if  there  is  a  balance  to  his  credit  large 
enough  to  meet  each  order  as  presented,  provided  the 
bank  has  no  right  of  lien  or  set-off  against  the  amount. 

Sometimes  the  pass  book  given  the  depositor  contains 
the  by-laws  of  the  bank  relating  to  the  receipt  of  deposits 
and  their  payment,  and  so  far  as  these  rules  or  by-laws 
are  reasonable  and  not  contrary  to  law  the  depositor  is 
bound  by  them.  No  secret  arrangement  between  the 
depositor  and  the  bank  can  be  shown  to  establish  a  right 
to  preference  by  one  depositor  over  others,  in  case  of 
failure  of  the  bank.  Of  course,  there  must  be  an  agree- 
ment, express  or  implied,  before  the  relationship  of  bank 
and  depositor  can  arise,  and  unless  one  who  owns  the 
money  consents  to  its  being  deposited  the  relation  does 
not  exist. 

59.  Before  there  can  be  a  binding  contract  of  any  kind 
there  must  be  an  agreement  between  two  or  more  par- 
ties.   The  agreement  may  be  presumed  from  the  actions 
of  the  parties  or  it  may  be  expressed  by  spoken  words 
or  by  written  instruments.     A  depositor  may  make  an 


48  SEC.  59 

express  agreement  with  the  bank,  in  which  case  that 
agreement  will  control  the  relationship.  By  his  action 
in  simply  opening  an  account  in  bank,  or  depositing 
money  to  the  credit  of  an  account,  we  saw  in  the  first 
chapter  of  this  work,  that  the  contract  of  depositor  and 
depositee  is  established.  It  is  an  implied  contract:  The 
law  makes  the  contract  which  the  conduct  of  the  parties 
shows  they  intend  shall  subsist  between  them.  But  to 
make  an  agreement,  either  express  or  implied,  a  binding 
contract  the  parties  who  make  the  agreement  must  be 
competent,  in  law,  to  contract.  In  most  States  now  a 
married  woman  can  contract  the  same  as  if  she  were  un- 
married. An  infant  is  not  competent  to  bind  himself  by 
a  contract  except  for  necessaries,  but  the  disability  is  for 
the  benefit  of  the  infant  and  the  other  party,  if  an  adult, 
is  bound,  while  the  infant  can  avoid  if  he  chooses.  Where 
the  infant  is  not  taken  advantage  of,  and  he  has  re- 
ceived all  that  is  due  him  under  a  transaction  which  has 
been  for  his  benefit,  the  other  party  cannot  be  further 
held.  In  most  of  the  States  the  law  provides  that  de- 
posits, when  made  by  an  infant  in  savings  banks,  can  be 
repaid  to  the  infant  and  the  receipt  of  such  infant  will 
discharge  the  bank.  In  some  States  savings  accounts  in 
savings  or  State  banks  can  be  thus  treated.  Under  gen- 
eral laws  where  an  infant  owns  property  he  has  no  right 
to  transfer  or  deal  with  that  property,  but  a  guardian 
must  be  appointed  to  manage  his  estate  until  he  arrives 
at  the  age  of  21.  It  is  believed  that  where  the  State  law 
provides  that  an  infant  may  control  his  savings  de- 
posited in  a  savings  bank,  the  state  or  national  banks  in 
such  State  would  be  safe  in  paying  out  to  an  infant 
money  deposited  by  himself  as  small  savings,  as  the  banks 
cannot  deny  the  right  of  the  infant  to  it  where  the 
money  was  taken  from  him;  but  where  the  money  has 
been  deposited  by  another  for  the  infant,  or  the  amount 


SEC.  60  49 

is  large  enough  to  justify  the  appointment  of  a  guardian, 
a  guardian  should  be  appointed.  A  male  is  an  infant 
until  21  years  of  age.  In  some  States  a  female  becomes 
of  age,  at  least  for  some  purposes,  at  18. 

60.  An  insane  person  is  not  generally  capable  of  en- 
tering into  a  binding  contract.    The  question  is  whether 
the  party  has  sufficient  mind  to  know  the  meaning  of  the 
contract  he  is  entering  into.    If  not  he  can  avoid  the  con- 
tract.    The  deposit  of  money  by  a  person  of  unsound 
mind,  where  the  bank  does  not  know  that  he  is  of  un- 
sound mind,  would  establish  the  relation  of  bank  and 
depositor.    If,  without  having  notice  of  his  condition,  the 
bank  paid  money  from  his  account  on  his  orders,  the 
bank  would  be  discharged.     After  a  bank  has  learned 
that  it  has  the  deposit  of  a  person  non  compos  mentis,  it 
should  not  pay  except  upon  the  order  of  a  committee  or 
guardian  appointed  to  take  charge  of  the  incompetent's 
property.     If  the  party  has  been  declared  insane  by  a 
competent  court,  or  a  committee  or  guardian  has  been 
appointed,  the  bank  is  presumed  to  have  notice  of  his 
insanity.     See  Sec.   179.     But  as  the  bank  usually  per- 
forms  the   functions   of  a   depositary   without   compen- 
sation, it  will  usually  be  discharged  when  it  performs 
the  duty  ordinarily  required  of  it,  in  paying  on  orders  of 
a  depositor  without  notice  of  his  insanity. 

61.  A  contract  entered  into  by  one  who  is  under  the 
influence  of  liquor  is  not  binding  upon  him  if  he  was  so 
drunk  that  he  did  not  know  what  he  was  doing.     As 
orders  by  the  depositor  must  be  promptly  paid  by  the 
bank  when  presented,  and  the  bank  oftentimes  pays  them 
to  persons  other  than  the  depositor  himself,  it  is  obvious 
that  the  bank  would  run  a  great  risk  in  paying  checks  of 
a  depositor  who  is  known  to  indulge  too  freely  in  intoxi- 
cants if  it  were  held  liable  to  pay  again  or  credit  back 
the   amount   upon   a    showing   that   the   drawer   of   the 


50  SEC.  61 

check  was  drunk  when  he  signed  the  check.  Of  course 
such  customers  are  undesirable.  But  where  a  contract 
is  made  by  one  who  is  insane  or  so  drunk  that  he  does 
not  know  what  he  is  doing  and  is  as  good  as  insane,  he 
can  avoid  the  contract  on  his  part.  However,  the 
signing  of  a  check  is  not  in  itself  the  making  of  a  con- 
tract with  the  bank.  It  is  an  order  upon  the  bank  pur- 
suant to  a  contract  already  made.  The  bank  has  agreed 
to  honor  orders  signed  by  the  depositor.  Therefore, 
where  the  bank  does  not  know  the  circumstances  under 
which  the  order  was  signed  it  should  be  discharged  upon 
payment  of  such  order.  When  the  depositor  signs  and 
delivers  a  check  to  the  bank  himself  the  bank  can  at 
least  see  his  condition;  but  where  the  depositor  delivers 
the  check  to  a  third  party  the  making  of  a  contract  is 
attempted  between  the  depositor  and  the  said  third  party. 
If  the  one  to  whom  the  check  is  delivered  knows  the 
condition  of  the  drawer,  he  knows  that  he  has  no  power 
to  make  a  contract  by  delivering  a  check,  and  when  he 
takes  the  check  to  the  bank  or  negotiates  it,  he  commits 
a  fraud.  Now  the  question  is  does  he  commit  a  fraud 
upon  the  depositor  or  upon  the  bank  or  the  one  to  whom 
he  negotiates  the  check?  If  drunk,  the  depositor  has 
made  it  possible  for  the  fraud  to  be  committed  and  he 
should  stand  the  loss,  or  if  innocent,  and  the  payee  of  the 
check  has  imposed  upon  the  drawer  by  taking  advantage 
of  his  insanity  or  by  making  him  drunk,  the  wrong  still 
has  been  done  to  the  drawer  first.  His  contract  with 
the  payee,  who  has  wronged  him,  is  voidable  and  he  can 
recover  (if  such  a  thing  is  possible)  what  the  payee  ob- 
tains under  the  check ;  but  surely,  where  the  bank  knows 
nothing  of  the  circumstances  attending  the  making  of 
the  check,  it  would  seem  that  the  contract  which  the 
bank  entered  into  when  it  received  the  deposit  justifies  it 
in  paying  any  orders  the  appearance  or  presentation  of 


SEC.  62  51 

which  do  not  raise  suspicion,  where  it  has  no  other  no- 
tice. Reed  v.  Mattapan  Deposit  &  Trust  Co.,  84  N.  E., 
469  (Mass.). 

62.  Where  Payable — The  deposit  is  payable  on  demand 
during  business  hours,  at  the  bank,  unless  some  other 
agreement  has  been  made  with  reference  to  its  payment. 

63.  Form  of  Order  to  Pay — If  the  depositor  verbally 
orders  the  bank  to  pay,  or  to  transfer  to  some  other  ac- 
count, his  deposit  or  any  part,  and  the  bank  carries  out 
the  instruction,  the  bank  will  be  discharged  and  the  de- 
positor will  be  bound.     Whitsett  v.  Peoples  Nat.  Bank 
of  Warrensburg,  119  S.  W.,  999.    It. is  the  custom,  how- 
ever, to  require  that  the  order  for  payment  be  in  the  form 
of  a  check  drawn  upon  the  bank,  or  that  a  receipt  or  some 
other  written  instrument  be  given  to  evidence  the  pay- 
ment by  the  bank.    And  the  bank  can  and  should  insist 
upon  some   written   evidence   being  given.     If  the   de- 
positor orders  the  payment  verbally  the  bank  is  under 
no  obligation  to  the  party  to  whom  it  was  ordered  to 
pay. 

64.  As  we  have  noted  before,  while  it  is  a  general 
principle  of  law  that  the  debtor  must  seek  the  creditor, 
the  bank  need  not  hunt  up  the  depositor;  its  contract  is 
to  pay  the  deposit  on  demand  at  the  bank. 

As  it  is  the  universal  custom  of  banks  to  pay  out  the 
depositor's  money  on  checks,  the  laws  relating  to  checks, 
their  form,  and  the  rights  and  obligations  attached  to 
them  will  now  be  considered. 


52  SEC.  65 


CHAPTER  V. 
CHECKS. 

65.  What  is — There  has  been  much  discussion  and 
diversity  of  opinion  as  to  whether  a  check  is  an  order 
merely  or  whether  it  is  a  bill  of  exchange ;  whether  it  is 
an  assignment  of  the  depositor's  funds  or  not,  etc.  The 
Negotiable  Instruments  Law,  which  has  now  become  law 
in  most  of  the  States  defines  a  check :  "A  check  is  a  bill 
of  exchange  drawn  upon  a  bank,  payable  on  demand." 

When  A  gives  to  B  a  check  reading: 

"A  B  C  Bank"  (Drawee) 

"Washington,  D.  C.,  Feb.  i,  1910 
"Pay  to  the  order  of  B  (Payee)  (or  B  or  order)  $1,000 

One  Thousand   Dollars 

(and  charge  to  account  of) 

A  (Drawer)  Depositor." 

This  is  the  same  as  if  A  handed  to  B  a  writing  as  fol- 
lows: "There  is  in  the  hands  of  A  B  C  Bank  one  thou- 
sand dollars  belonging  to  me,  which  ABC  Bank  will 
pay  to  you,  or  to  any  one  you  order  ABC  Bank  to  pay 
it  to,  upon  prompt  presentation  of  this  paper,  and  if  the 
bank  does  not  so  pay  to  you  or  any  one  to  whom  you 
endorse  this  check,  I  will  pay  the  same."  The  law  reads 
into  the  check  substantially  these  words.  The  one  to 
whom  the  check  is  made  payable  (B)  can  transfer  it  to 
another  by  simply  endorsing  it  (i.  e.,  writing  his  name 
upon  it,  usually  on  the  back).  And  so  it  may  be  passed 
along  from  one  to  another.  If  the  check  is  payable  to  B 


SEC.  66  53 

or  order,  or  to  the  order  of  B,  and  B  endorses  it  by  simply 
writing  his  name,  this  is  an  endorsement  in  blank  and  the 
check  can  then  be  transferred  by  the  one  to  whom  B  en- 
dorsed it  without  any  additional  endorsement.  And 
where  a  check  is  payable  to  "Bearer,"  or  to  "A  or  bearer," 
it  can  be  transferred  without  endorsement.  Where  pay- 
able to  bearer,  or  payable  to  order  and  endorsed  by  the 
payee,  no  further  endorsement  is  required  in  law  to 
transfer  title,  but  the  bank  is  not  buying  the  check  when 
presented  for  payment.  It  is  paying  the  order,  and  the 
custom  is  to  require  the  holder  to  endorse  it,  and  the 
bank  should  require  the  one  to  whom  it  pays  to  endorse, 
as  this  is  evidence  in  the  nature  of  a  receipt  for  the 
payment.  In  can  not  be  insisted  upon,  however. 

Where  payable  simply  to  the  drawer  and  presented  by 
himself  no  endorsement  on  back  is  necessary.  The  de- 
positor's order  to  pay  must  be  honored  and  when  sur- 
rendered is  evidence  of  payment. 

66.  Drawing  the  Check — Care  should  be  taken  in 
drawing  a  check.  It  should  be  properly  dated.  There 
should  be  no  blank  space  left  before  or  after  the  written 
statement  of  the  amount  or  before  or  after  the  figures  in- 
dicating the  amount.  The  drawer  should  begin  writing 
the  amount  at  the  extreme  left  end  of  the  line,  so  that 
there  may  be  no  opportunity  to  fill  in  additional  words. 
The  figures  should  be  accurately  made  and  in  such  a 
clear  manner  that  they  cannot  be  easily  changed.  If  the 
bank  makes  a  mistake  in  paying  a  check,  or  pays  a  forged 
check,  or  an  amount  in  excess  of  what  the  check  was 
drawn  for,  the  bank  must  stand  the  loss.  But  while  the 
depositor  is  not  called  upon  to  insure  the  bank  against 
his  checks  being  forged  or  raised,  he  should  use  such 
care  in  preparing  his  checks  as  will  at  least  not  make  it 
easy  for  one  getting  possession  of  the  check  to  commit 
a  fraud  on  the  bank.  And  if  the  depositor  is  negligent 


54  -      SEC.  67 

he  may  have  to  bear  the  loss  himself.  If  he  leaves  a 
space  which  can  be  easily  filled  in  to  raise  the  amount, 
he  will  have  to  bear  the  loss  occasioned  by  his  own 
negligence.  If  he  signs  checks  in  blank  and  leaves  them 
with  an  agent,  through  whose  negligence  a  blank  signed 
check  is  stolen  and  filled  in,  or  if  through  his  own  negli- 
gence someone  gets  hold  of  the  check,  and  fills  it  in  and 
passes  it  to  an  innocent  person  who  gives  value  for  it 
without  notice,  the  depositor  must  stand  the  loss  for 
which  his  negligence  is  responsible. 

67.  Date — The  check  should  be  dated.     If  not  dated, 
any  holder  can  fill  in  the  date.     If  dated  on  Sunday  the 
check  will  not  be  invalid,  but  a  check  cannot  be  delivered 
or  paid  on  Sunday  without  the  risk  of  its  being  declared 
invalid.     The  date  of  delivery  is  the  date  on  which  any 
contract  takes  effect.    Where  the  date  on  which  any  act 
is  to  be  done  under  a  negotiable  instrument  falls  on  Sun- 
day or  a  legal  holiday,  in  most  States  the  act  may  be  done 
on  the  next  succeeding  secular  or  business  day.    In  some 
States  the  day  before  is  designated,  and  in  some  States 
Saturday  or  part  of  Saturday  is  a  holiday. 

68.  Change   of   Date — Where   the   check    is    properly 
dated  and  any  holder  changes  the  date  without  the  con- 
sent of  all  parties  on  the  check  it  would  seem  that  the 
check  would  be  void  under  the  Negotiable  Instruments 
Law,  which  provides  that  "Where  a  negotiable  instru- 
ment is  materially  altered  without  the  assent  of  all  par- 
ties liable  thereon,  it  is  avoided,  except  as  against  a  party 
who  has  himself  made,  authorized,  or  assented  to  the  al- 
teration  and    subsequent   endorsers."      "Any   alteration 
which  changes:  i.  The  date ;    *    *    *    is  a  material  alter- 
ation."    "But  when  an  instrument  has  been  materially 
altered  and  is  in  the  hands  of  a  holder  in  due  course,  not 
a  party  to  the  alteration,  he  may  enforce  payment  thereof 
according  to  its  original  tenor." 


SEC.  69  55 

69.  Post  Dated — Where  a  post-dated  check  is  changed 
in  date  the  depositor  cannot  be  held  liable  thereon  and  if 
the  bank  pays  before  its  original  date  it  will  have  to 
stand  the  loss,  but  can  recover  from  the  one  it  paid  it 
to.    Otherwise,  where  the  date  is  changed,  the  depositor 
will  be  liable  to  a  bona  fide  holder  to  the  same  extent 
that  he  could  be  held  if  the  date  had  not  been  changed. 
See  Sec.  98. 

6o,a.  A  contract  made  on  a  holiday  is  valid.  The  holi- 
day suspends  performance  of  some  acts.  See  Sec.  67. 

70.  Form — The  blanks  provided  by  the  bank  should 
be  used  whenever  possible,  but  a  check  on  one  bank, 
written  upon  the  blank  form  of  another  bank,  with  the 
name  of  the  bank  changed,  is  valid,  and  where  one  bank 
pays  such  a  check  the  bank  on  which  it  is  drawn  cannot 
charge  the  paying  bank  with  negligence. 

There  is  no  particular  form  required  by  law.  Any 
sufficient  demand  upon  the  bank  would  make  the  bank 
liable  to  the  depositor,  but  where  a  check  is  used  and  is 
intended  to  pass  as  money  in  a  transaction  between  the 
depositor  and  parties  other  than  the  bank,  the  essentials 
necessary  to  make  it  a  negotiable  check  must  be  present. 

71.  There  must  be  an  unconditional  order  upon  the 
bank,  to  pay  a  sum  certain,  in  money,  upon  demand,  to 
a   specified   person   or  his   order,   or  to   such   person   or 
bearer,  or  to  bearer.     If  no  person  is  named  to  whom  it 
is  payable,  it  is  not  a  check.   But  where  the  name  of  a  fic- 
titious person  or  a  name  of  an  account,  or  a  number,  as 
"Cash,"  "No.  583,"  etc.,  is  designated  as  payee,  such  check 
is  payable  to  bearer. 

If  the  check  is  payable  at  a  future  date,  i.  e.,  at  a  later 
date  than  the  date  of  issue,  and  not  on  demand,  it  is  a 
bill  of  exchange,  and  where  the  Negotiable  Instruments 
Law  is  not  in  force  a  bill  of  exchange  is  entitled  to  grace, 
and  the  holder  can  present  for  acceptance,  and  protest  if 


56  SEC.  72 

not  accepted,  whereas  a  holder  of  a  check  can  present  for 
payment  only  on  the  due  date,  without  grace,  and  not  for 
acceptance. 

72.  The  number  on  a  check,  memoranda  as  to  what  the 
payment  is  for,  etc.,  are  simply  for  the  benefit  or  informa- 
tion of  the  drawer,  and  to  the  bank  are  the  same  as  if 
they  were  not  present  on  the  instrument.     "December 
taxes."    "For  rent,"  "B.  P.  No.  2,"  etc.,  are  phrases  which 
the  bank  need  pay  no  attention  to.    All  the  bank  looks  to 
is  the  date,  amount,  order  to  pay,  the  signatures  and  the 
identity  of  the  person  presenting  the  check.     Care  must 
of  course  be  exercised  in  identifying  the  one  to  whom 
money  is  paid  on  a  check.    In  order  that  the  holder  may 
be  identified  there  must  be  a  specified  person. 

73.  Writing  in  Body  of  Check — The  fact  that  the  hand- 
writing in  the  body  of  the  check  is  not  the  writing  of  the 
depositor  whose  signature  the  check  bears,  is  not  in  it- 
self notice  that  the  check  is  wrongfully  drawn.     It  may 
be  written,  stamped,  typewritten  or  printed.     Of  course, 
it  might  be,  in  some  instances,  enough  to  give  the  bank 
warning  of  something  being  wrong.     A  bank  cannot  re- 
fuse to  honor  checks  rightfully  drawn,  and  at  the  same 
time  is  liable  if  it  pays  a  check  which  is  forged  or  raised, 
so  that  the  bank  must  bear  the  responsibility  of  deciding 
in  each  particular  case  whether  there  is  sufficient  irregu- 
larity to  warrant  dishonoring  a  check  and  taking  the  con- 
sequences of  refusing  to  pay  if  the  check  is  valid. 

74.  The  Negotiable    Instruments  Law    provides    that 
where  the  sum  payable  is  expressed  in  words  and  also  in 
figures,  and  there  is  a  discrepancy  between  the  two,  the 
sum  denoted  by  the  words  is  the  sum  payable ;  but  if  the 
words  are  ambiguous  or  uncertain,  reference  may  be  had 
to  the  figures  to  fix  the  amount.    When  there  is  conflict 
between  the  written  and  printed  provisions  of  the  instru- 
ment, the  written  provisions  prevail. 


SEC.  75  57 

75.  Amount  of  Checks — One  of  the  general  principles 
of  equity  is  that  if  A  owes  B,  B  cannot  split  up  his  right 
against  A  and  assign  different  parts  of  it  to  C,  D,  and  E, 
etc.     And  partly  on  this  principle  is  based  the  theory 
that  a  check  for  only  a  part  of  the  fund  is  not  an  assign- 
ment of  the  fund,  but  that  it  belongs  to  the  depositor 
until  the  bank  has  actually  paid  the  check.     In  banking 
business,  however,  the  custom  of  paying  and  the  right  to 
demand  payment  of  checks  in  any  amount  has  become  so 
well  established  that  the  rule  mentioned  does  not  apply 
to  a  deposit  in  bank;  and  unless  there  is  an  agreement 
to  the  contrary  with  the  bank,  the  depositor  can  draw 
checks  against  his  account  (so  long  as  he  has  the  funds 
in  bank)  in  such  amounts  as  he  sees  fit.    He  cannot,  how- 
ever, draw  innumerable  small  checks  merely  for  the  pur- 
pose of  annoying  the  bank,  or,  where  checks  give  the 
holder  the  right  to  sue,  give  many  small  checks  simply 
to  vex  the  bank  with  many  suits. 

76.  By  an  act  of  Congress  of  March  4,  1909,  the  crim- 
inal laws  of  the  United  States  were  codified.    Section  179 
of  that  act  reads  as  follows : 

"No  person  shall  make,  issue,  circulate,  or  pay  out  any 
note,  check,  memorandum,  token  or  other  obligation  for 
a  less  sum  than  one  dollar,  intended  to  circulate  as  money 
or  to  be  received  or  used  in  lieu  of  lawful  money  of  the 
United  States;  and  every  person  so  offending  shall  be 
fined  not  more  than  five  hundred  dollars  or  imprisoned 
not  more  than  six  months,  or  both,  at  the  discretion  of 
the  court." 

This  is  not  a  new  law,  but  its  codification  without  any 
explanation  has  raised  a  doubt  in  the  minds  of  many 
whether  a  check  for  less  than  one  dollar  can  be  given. 
The  law  was  passed  in  1862,  being  a  part  of  the  act  of 
July  17,  1862,  and  afterwards  became  Section  3583  of  the 
Revised  Statutes  of  the  United  States  and,  together  with 


58  SEC.  77. 

the  other  sections  of  the  Revised  Statutes  relating  to 
legal  tender  and  money,  provides  a  punishment  for  the 
issuing  of  any  paper  to  circulate  as  money  where  there 
is  no  authority  of  law  for  its  issue.  Where  A  gives  B  a 
check  in  payment  of  a  debt,  it  is  true  that  in  a  sense  it 
takes  the  place  of  money,  but  A  does  not  intend  that  the 
check  shall  circulate  in  the  hands  of  any  holder  as  money. 
He  intends,  primarily,  that  B  shall  present  the  check  at 
the  bank  and  obtain  the  money. 

Some  of  the  States  provide  by  statute  that  no  paper 
shall  be  issued  to  "circulate  as  money,"  other  than  law- 
ful money  of  the  United  States  and  bank  notes,  where 
authorized,  and  some  likewise  prohibit  the  issue  of 
checks  for  less  than  one  dollar  "to  circulate  as  money." 

77.  Signature — Having     been     carefully     drawn,     the 
check  must  be  signed  by  the  depositor  in  the  name  under 
which  he  has  deposited  the  money,  or  under  which  the 
bank  has  agreed  to  pay  out  the  money.     A  signature  in 
pencil  is  valid.     A  printed  signature  or  a  rubber  stamp 
impression  of  a  signature   is  valid,  where   it  has  been 
agreed  that  such  signature  is  to  be  used.     But  where  a 
party  brings  suit  on  a  check  so  signed  he  must  show  that 
the  stamp  or  printed  signature  has  been  adopted.    Where 
a  stamp  is  used,  care  should  be  taken  to  avoid  its  im- 
proper use  by  another.    If  through  the  depositor's  negli- 
gence the  stamp  is  wrongfully  used  on  a  check,  the  de- 
positor will  have  to  stand  the  loss.    If  the  depositor  can- 
not write,  he  must  have  someone  else  write  his  name  for 
him,  make  a  mark  "x,"  and  have  witnesses  to  his  having 
made  the  mark  as  an  acknowledgment  of  the  signature 
as  his.     Some  one  should  be  authorized  to  sign  for  him. 
See  Sec.  79. 

78.  Corporation — Where  a  check  is  drawn  by  a  cor- 
poration, the  bank  should  require  evidence  of  authority 


SEC.  79  59 

of  those  who  sign  for  the  company,  and  having  agreed 
upon  the  signature  to  be  honored,  should  pay  no  checks 
unless  so  signed.  Only  such  officers  of  a  corporation  can 
sign  as  are  given  authority  by  the  charter  or  by-laws  of 
the  corporation.  A  corporation  can  only  act  through  its 
officers  and  agents,  and  such  officers  or  agents  can  bind 
the  corporation  only  so  far  as  they  have  authority.  But 
where  a  corporation  holds  out  an  officer  as  having  au- 
thority, the  corporation  will  be  bound  where  by  the  exer- 
cise of  such  authority  the  corporation  has  received  bene- 
fits. So  a  corporation  will  be  bound  by  the  acts  of  its 
officer  where  upon  his  signature  to  checks  the  corpora- 
tion receives  the  deposit.  The  proper  signature  is  the 
name  of  the  company,  followed  by  the  name  of  the  officer 
and  his  title,  but  where  the  name  of  the  company  appears 
elsewhere  in  the  check  the  same  need  not  appear  again  in 
the  signature,  and  frequently  does  not ;  and  the  signature 
is  presumed  to  be  the  signature  of  the  company. 

79.  Power  of  Attorney — Where  one  person  has  been 
authorized  to  draw  checks  on  another's  account,  checks  so 
drawn  can  be  paid  by  the  bank  so  long  as  it  has  no  notice 
that  the  agency  has  been  revoked  or  the  authority  with- 
drawn.   It  must  not  pay  a  check  drawn  after  expiration 
of  the  time  for  which  the  authority  was  granted,  nor  after 
the  revocation  of  authority,  where  it  has  notice.     If  a 
check  has  been  drawn  after  revocation,  but  before  the 
bank  has  notice,  the  party  for  whom  the  agent  had  been 
acting  and  against  whose  account  the  check  was  drawn 
cannot  hold  the  bank  liable  unless  he  can  show  that  the 
one  to  whom  the  bank  paid  the  money  was  not  a  bona 
fide  holder  for  value. 

80.  The  mere  fact  that  an  agent  has  authority  to  de- 
posit money  for  his  principal  does  not  in  itself  emppwer 
him  to  withdraw  the  money  or  sign  checks.    Bank  v.  Gib- 
boney,  (Ind.)  87  N.  E.,  1064. 


60  SEC.  81 

A  written  power  of  attorney  from  the  principal  to  the 
agent  should  be  filed  with  the  bank. 

81.  Partnership  Funds. — Where  a  partnership  depos- 
its money,  each  partner  has  authority  to  sign  the  partner- 
ship name.     Each  partner  is  agent  for  all.     But  no  one 
can  use  the  partnership  money  to  pay  a  private  debt,  and 
the  account  should  be  in  the  name  of  the  partnership, 
and  checks  so  signed.    The  bank  should  not  pay  on  the 
individual  signature  of  one  partner.     If  it  does,  and  the 
money  is  not  used  for  partnership  purposes,  the  bank 
will  be  liable. 

82.  When  one  partner  dies,  his  death,  in  most  States, 
dissolves  the  partnership,  and  the  survivor,  or  survivors, 
become  vested  with  title  to  the  assets  for  the  purpose  of 
winding  up  the  affairs  of  the  partnership.     In  such  case 
the  survivor  can  draw  out  the  money  in  his  own  name. 

83.  Joint  Deposits. — Where  money  is  the  joint  fund  of 
persons  not  partners  in  trade,  generally  each  one  must 
sign  checks  or  orders  withdrawing  the  fund,  though  there 
may  be  an  agreement  between  the  parties  and  the  bank, 
that  checks  are  to  be  signed  by  one,  in  which  case  checks 
so  signed  must  be  honored. 

84.  When  a  deposit  is  made  by  husband  and  wife,  pay- 
able to  both  or  either,  checks  signed  by  either  one  alone 
or  by  both  must  be  honored,  but  the  question  as  to  whose 
money  it  is  depends  upon  all  the  facts. 

85.  On  the  death  of  one  of  several  persons  in  whose 
names  the  deposit  is  made,  the  question  as  to  what  dis- 
position the  bank  should  make  of  the  money  depends 
upon  all  the  facts  and  circumstances.    In  one  case  where 
a  certificate  of  deposit  was  issued  in  the  name  of  A  and 
B,  his  wife,  and  payable  to  A  and  B  or  A  or  B,  on  the 
death  of  A  it  was  held  by  a  Maryland  court  that  B  was 
only  the  agent  of  A,  and  A's  death  revoked  her  author- 
ity to  draw  the  money.    If  the  money  was  actually  the 


SEC.  86  61 

joint  property  of  all,  the  death  of  one  would  leave  the 
title  in  the  survivor  or  suvivors.  If  the  property  of  one, 
but  deposited  merely  with  the  understanding  that  others 
could  draw  it  out,  of  course,  then  the  death  of  the  owner 
would  revoke  the  right  of  the  others  to  draw.  All  the 
facts  and  circumstances  must  be  considered.  If  the  one 
who  deposits  it  has  full  control  over  the  money  during 
his  life,  his  death  will  revoke  authority  given  to  others 
to  check  against  it ;  but  where  all  control  and  jointly  own 
the  fund,  the  survivors  are  entitled  to  it.  In  any  event, 
if  there  is  an  agreement  between  the  parties  and  the 
bank,  the  agreement  controls.  If  the  bank,  on  the  death 
of  one,  pays  the  money  to  the  wrong  person,  it  will  be 
liable  to  the  rightful  owner.  See  sec.  177.  When  such 
deposits  are  made  the  bank  should  have  an  understand- 
ing with  all  parties  interested,  as  to  the  ownership  of  the 
money,  not  merely  the  right  to  withdraw.  Where  par- 
ties agree  the  agreement  will  control. 

86.  When  more  than  one  executor  or  administrator  is 
appointed,  usually  the  act  of  one  binds  all ;  and  so  if  one 
draws  a  check  the  bank  will  be  discharged  if  it  pays  the 
check.    De  Haven  v.  Williams,  89  Pa.  St.,  480. 

87.  The  law  relating  to  trustees,  however,  is  different; 
all  must  join  in  making  contracts,  and  so  all  must  sign 
checks. 

87a.  Signature  File. — The  bank  should  keep  a  proper 
file  of  its  customers*  signatures.  It  is  bound  to  pay 
checks  when  properly  signed ;  but  as  the  bank  pays  checks 
at  its  peril,  the  individual,  corporate  and  partnership 
names  and  authorized  signatures  should  be  well  known 
to  the  officers  who  pay  the  checks. 

88.  Delivery. — A  check  is  not  binding  upon  the  maker, 
or  drawer,  until  he  has  delivered  it  to  the  payee  or  the 
payee's  agent,  or  at  least  parted  with  it  with  the  inten- 
tion that  the  payee  should  become  entitled  thereto.     So, 


62  SEC.  88a 

when  the  payee  endorses  it,  the  transfer  to  the  endorsee 
is  not  complete  until  delivery.  However,  where  a  check 
has  been  signed,  or  endorsed,  but  not  delivered,  if  it  is 
stolen  and  comes  into  the  hands  of  a  bona  fide  holder  for 
value,  without  notice,  the  maker  or  endorser  will  be 
liable  to  such  holder  in  good  faith,  for  value,  without 
notice.  Voss  v.  Chamberlain  (Iowa),  117  N.  W.,  269. 
And  in  such  case  a  payment  to  the  bona  fide  holder 
would  release  the  bank.  But  if  forged,  no  one  could  ac- 
quire any  right  against  the  one  whose  name  was  forged. 

88a.  Endorsements. — We  have  seen  that  a  check  pay- 
able to  bearer,  or  payable  to  order  and  endorsed  in  blank, 
is  negotiable  by  delivery.  See  Sec.  65. 

If  the  holder  desires,  to  prevent  further  negotiation,  ex- 
cept by  B,  he  may  endorse  it  "Pay  to  B  or  order,"  and  sign 
his  name  "Holder,"  or  "Pay  to  the  order  of  B,  Holder." 
This  is  a  special  endorsement.  The  check  is  now  pay- 
able to  B  only;  until  B  has  endorsed  it  no  one  can  get 
title  to  it  as  to  B.  B,  however,  takes  absolute  title  and 
can  further  negotiate  it,  by  endorsing  as  he  sees  fit. 

If  the  holder,  say  A,  received  the  check  endorsed  in 
blank,  i.  e.,  by  the  payee  merely  having  written  his  name 
on  back,  A,  if  he  wishes  to  prevent  negotiation  of  the 
check,  can  write  over  the  blank  endorsement  "Pay  to  A 
or  order,"  when  the  check,  as  stated  in  the  preceding  par- 
agraph, cannot  be  negotiated  until  A  has  endorsed  it. 

If  the  holder  (A)  desires  to  endorse  it  to  another 
merely  to  collect  for  him,  or  to  give  the  transferee  title 
only  for  a  special  purpose,  he  can  endorse  it  "Pay  to  B 
Bank,  for  collection;"  "Pay  to  B  only;"  "A,  for  Deposit 
only,"  etc.,  signing  his  name,  in  which  cases  the  endorse- 
ment would  be  restrictive.  The  one  to  whom  endorsed, 
B,  would  take  title  only  for  the  purpose  of  collection,  or 
for  use  as  may  be  stated  in  the  endorsement.  He  would 
have  no  right  to  negotiate  the  instrument,  but  to  collect 


SEC.  88b  63 

or  use  it  for  the  special  purpose  only,  and  anyone  who 
took  it  from  B  would  have  notice  that  the  proceeds  be- 
longed to  A,  and  would  take  no  better  title  to  it  than  B 
himself  had.  If  endorsed  to  the  "order"  of  the  endorsee, 
though  restrictive,  he  obtains  full  title  and  a  bona  fide 
holder  would  take  title  by  endorsement  from  B. 

88b.  Whether  the  holder  transfers  a  negotiable  instru- 
ment by  endorsement  or  by  delivery,  he  warrants  to  the 
one  he  transfers  to.  "That  the  instrument  is  genuine  and 
in  all  respects  what  it  purports  to  be;  that  he  has  good 
title  to  it ;  that  all  prior  parties  had  capacity  to  contract ; 
and  that  he  has  no  knowledge  of  any  fact  which  would 
impair  the  validity  of  the  instrument  or  render  it  value- 
less." 

When  he  endorses,  however,  he  also  warrants  to  all 
subsequent  holders  in  due  course,  that  the  instrument 
is  at  the  time  of  his  endorsement  valid  and  subsisting 
and  that  it  will  be  accepted  or  paid,  or  both,  on  due  pre- 
sentment, according  to  its  tenor,  and  that  if  it  be  dis- 
honored, and  the  necessary  proceedings  on  dishonor  be 
duly  taken,  he  will  pay  the  amount  thereof  to  the  holder, 
or  to  any  subsequent  endorser  who  may  be  compelled  to 
pay  it.  The  "necessary  proceedings  on  dishonor"  are 
protest,  and  notice  of  dishonor.  A  local  check  need  not 
be  protested,  but  where  there  are  endorsers  it  is  better 
to  protest.  See  Sec.  89  et  seq. 

Where  a  check  is  drawn  in  one  state  on  a  bank  in  an- 
other state,  it  is  a  foreign  bill  of  exchange,  and  should 
be  protested.  Where  protested,  the  protest  should  be 
made  on  the  day  of  dishonor  at  the  place  where  it  is  dis- 
honored. We  have  seen  that  a  check  is  usually  presented 
for  payment  and  not  for  acceptance;  and  that  the  en- 
dorser does  not  warrant  to  the  bank  on  which  drawn 
the  signature  of  the  drawer.  See  Sec.  141. 

88c.  Without  Recourse. — Where  any  holder  wishes  to 


64  SEC.  88d 

transfer  title,  but  avoid  liability  if  the  drawee  or  a  prior 
endorser  does  not  pay,  he  can  do  so  by  endorsing  "with- 
out recourse,"  and  signing  his  name.  Such  an  endorse- 
ment is  called  a  qualified  endorsement.  It  passes  title 
to  the  instrument  and  the  endorser  makes  the  same 
warranties  as  stated  in  Sec.  88b,  but  to  the  person  to 
whom  he  transfers  only.  He  does  not  agree  to  pay  if 
the  drawer  or  maker  does  not  pay;  and  he  does  no*  be- 
come in  any  way  liable  to  anybody  but  his  immediate 
transferee. 

88d.  Signature. — The  signature  in  an  endorsement 
must  correspond  exactly  with  the  name  on  the  face  of 
the  check.  If  the  name  is  misspelled,  the  endorsement 
can  be  written  first  as  appears  on  the  face  and  then  in 
the  proper  name  of  the  endorser. 

88e.  Bank. — When  a  bank  becomes  the  holder  of  a 
check  drawn  on  another  bank,  by  cashing  or  giving  credit 
for  same,  or  by  transfer  by  delivery  or  endorsement  from 
the  holder,  the  bank  becomes  entitled  to  the  same  rights 
and  assumes  the  same  liabilities  as  any  other  endorsee 
or  transferee.  It  does  not  guaranty  the  signature  of  the 
maker  of  the  check,  by  paying.  The  guaranty  of  de- 
positor's signature  is  only  by  bank  on  which  check  is 
drawn. 

89.  Presentment. — When  A  gives  a  check  to  B,  A  is 
not  discharged  until  the  check  is  paid,  unless  there  is  a 
distinct  understanding  that  the  check  shall  be  payment. 
See  Sec.  154.  Otherwise,  if  a  worthless  check  were  given, 
the  original  debt  could  not  be  sued  on  and  the  debtor  would 
escape  payment.  However,  when  A  gives  a  check,  it  must 
be  presented  at  the  bank,  during  banking  hours,  within  a 
reasonable  time.  If  it  is  not,  and  any  loss  arises  which 
either  A  or  the  holder  must  bear,  the  burden  of  the  loss 
will  fall  upon  the  holder.  A  would  have  no  right  to  draw 
a  check  if  he  had  not  sufficient  funds  in  bank  to  meet  it, 


SEC.  90  65 

and  no  right  to  draw  out  all  his  funds  to  prevent  the  holder 
from  collecting  the  check,  no  matter  how  long  it  might  be 
outstanding.  But  if  the  bank  should  fail,  and  the  facts  be 
such  that  the  check,  drawn  in  good  faith,  would  have  been 
paid  if  there  had  been  no  delay,  the  one  who  delayed  must 
bear  the  loss.  A  should  not  be  held  to  bear  a  loss  which 
would  not  have  occurred  if  the  check  had  been  presented 
in  a  reasonable  time. 

90.  If  the  payee  lives  at  the  place  where  the  bank  on 
which  the  check  is  drawn  is  located,  the  check  should  be 
presented  on  the  same  day  it  is  received  or  on  the  day 
following  the   day  of   its  receipt.     If  the  payee   is   at  a 
different  place  he  must  send  it,  the  same  day  or  the  day 
following  the   day  of   its   receipt,    for   presentment,   in   a 
reasonably  direct  way.     If  the  one  who  takes  the  check 
knows  that  the  bank  on  which  it  is  drawn  is  in  a  failing 
condition,  he  should  immediately  make  presentment,  to 
save  any  loss  to  the  drawer,  the  endorser,  and  possibly  to 
himself.     If  the  check  is  presented  through  a  clearing 
house,  generally  another  day  is  given  to  make  present- 
ment, to  bind  endorsers. 

91.  If   presentation   is    delayed   beyond   the   time   men- 
tioned and  a  loss  is  incurred,  as  by  the  bank's  failing,  the 
holder  of  the  check  must  stand  any  actual  loss  as  between 
holder  and  drawer.     As  between  holder  and  a  prior  party, 
the  one  at  fault  must  suffer  the  loss.     If  the  maker  had 
no  funds  in  the  bank  when  the  check  was  drawn,  or  drew 
the  money  out  before  the  check  was  presented,  this  would 
not  be  a  loss,  but  if  intentional  might  be  a  fraud. 

92.  The    Negotiable   Instruments   Law    provides   that   a 
check  must  be  presented  for  payment  "within  a  reasonable 
time  after  its  issue,  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by  the 
delay."     When  A  gives  a  check  he  has  the  right  to  have  it 
presented   for  payment.     And  the   fact  that  the  check  is 


66  SEC.  93 

endorsed  by  the  payee  and  negotiated,  does  not  extend  the 
time  within  which  it  much  be  presented  as  against  the 
drawer,  A.  Dehoust  v.  Lewis,  112  N.  Y.  S.,  559.  As 
stated  above,  the  rule  adopted  in  most  states  is  that  the 
check  must  be  presented  not  later  than  the  close  of  business 
on  the  day  following  the  day  of  its  receipt  by  the  payee-  or 
holder.  If  the  party  receiving  it  is  not  in  the  same  place 
where  the  bank  is  located,  he  must  forward  it,  before  the 
end  of  the  day  following  the  day  of  its  receipt,  in  a  rea- 
sonably direct  way,  for  presentment. 

However,  the  payee  may  negotiate  the  check,  by  endorse- 
ment, or  otherwise  transfer  his  rights  therein.  Where  he 
does  it  by  endorsement,  in  order  to  bind  the  endorsers  the 
holder  must  present  it  within  the  same  reasonable  time  after 
he  receives  it  (the  same  day  or  the  day  following),  and 
the  Negotiable  Instruments  Law  provides  that  when  an 
instrument  has  been  negotiated  it  must  be  presented  "within 
a  reasonable  time  after  the  last  negotiation  thereof,"  to 
bind  endorsers.  So  that  under  this  law,  if  the  payee  en- 
dorses the  check  to  C,  C  endorses  it  to  D,  etc.,  the  last  one 
to  whom  it  is  endorsed  has  until  the  close  of  business  on 
the  day  following  the  day  of  its  receipt  by  him,  to  present 
or  forward  it  for  presentation.  Columbian  Banking  Co.  v. 
Bowen  (Wis.),  114  N.  W.,  451 ;  Plover  Sav.  Bk.  v.  Moodie, 
no  N.  W.,  29  (Iowa).  If  it  is  not  presented  then,  the 
endorsers  are  absolutely  discharged  in  some  states  (Aebi  v. 
Bank  of  Evansville,  124  Wis.,  73),  while  in  other  states 
they  are  discharged  only  to  the  extent  that  the  delay  in 
presentation  has  caused  a  loss  which  would  not  have  been 
suffered  if  the  instrument  had  been  promptly  presented 
(Small  v.  Franklin  Mining  Co.,  99  Mass.,  277). 

93.  Where  Drawer  Has  Lost  Nothing. — Where  the 
drawer  has  lost  nothing  or  suffered  no  injury  by  reason 
of  the  delay,  he  is  liable  on  the  check  no  matter  how  long 
presentation  may  have  been  delayed;  but  if,  after  a  long 


SEC.  93a  67 

delay,  the  check  is  presented  and  not  paid,  the  claim  on  the 
original  debt  may  be  barred,  though  the  check  itself  might 
not  be. 

93a.  Delay  in  making  presentment  is  excused  when 
caused  by  circumstances  "beyond  the  control  of  the  holder 
and  not  imputable  to  his  default,  misconduct  or  negligence." 

93b.  If  the  maker  has  no  funds  in  the  bank  when  he 
gives  the  check,  or  if  he  directs  the  bank  not  to  pay,  no 
presentment  need  be  made ;  and  where  the  check  was  given 
the  payee  for  his  accommodation  and  he  has  endorsed  it, 
no  presentment  need  be  made  to  bind  him  as  an  endorser,  as 
"he  has  no  reason  to  expect  that  the  instrument  will  be 
paid  if  presented." 

93c.  To  be  on  the  safe  side,  prompt  presentment  should 
always  be  made  by  every  holder  of  a  check,  unless  a  prompt 
negotiation  thereof  is  made. 

94.  Notice. — Presentation  having  been  properly  made, 
if  payment  is  refused  the  holder  must  notify  the  drawer 
and  endorsers.     Notice  should  be  given  the  same  day  or 
the  day  following  the  day  of  dishonor.     A  check  need  not 
be  protested,  but  it  is  customary  to  protest  nevertheless,  as 
in  proving  presentation  and  dishonor  the  notary's  certificate 
of  protest  furnishes  prima  facie  evidence.     No  protest  is 
required  where  the  payee  himself  presents  the  check  at  the 
bank  and  payment  is  refused,  as  prompt  presentment  for 
payment  is   all  that  need  be  made  to  protect  the  payee 
against  the  maker.     But  he  should  be  notified,  in  order  that 
he  may  protect  himself  if  the  bank  has  made  a  mistake. 
Cassel  v.  Regierer,  114  N.  Y.  S.,  601.    See  Sec.  88b. 

95.  The  payee  of  a  check,  or  the  holder  thereof,  should 
not  mail  it  direct  to  the  drawee  bank  for  payment.     If 
presentation  cannot  be  made  at  the  bank,  it  should  be  sent 
to  some  other  bank  for  presentation.     A  negotiable  instru- 
ment should  not  be  surrendered  until  paid,  and  sending 
direct  to  the  drawee  is  generally  held  to  be  negligence.     R. 


68  SEC.  96 

H.  Herron  Co.  v.  Mawby,  89  Pac.,  872  (Cal.)  ;  Win- 
chester Milling  Co.  v.  Bank  of  Winchester  (Tenn.),  in 
S.  W.,  248. 

96.  Stale   Checks. — When  a   check  is   presented  at  a 
bank  or  offered  by  a  payee  or  holder  to  a  creditor  long 
after  its  issue,  the  bank  or  the  creditor  must  determine 
whether  there  are  sufficient  circumstances  to  warrant  an 
inquiry  from  the  maker  as  to  whether  the  check  is  still 
good,  before  paying  or  accepting  same;  for,  if  the  check 
is  stale,  and  the  drawer  has  equities  which  he  can  set  up  as 
a  defense  to  the  check,  the  bank  might  not  be  allowed  to 
charge  the  payment  to  the  depositor,  or  the  one  who  takes 
it  might  be  unable  to  recover  on  it  from  the  maker.     A  few 
days  would  not  be  sufficient  to  give  notice  of  any  equities. 
Whether  the  bank  has  been  negligent  in  paying  a  stale 
check,  or  whether  it  has  been  justified  in  refusing  to  pay  a 
check  long  outstanding  is  a  question  of  fact  for  the  jury. 
This  is  another  case  where  the  bank  is  between  two  fires. 
The  bank  is  bound  to  pay  all  valid  orders  and  must  stand 
the  loss  if  it  pays  one  wrongfully.    It  has  been  held  that  a 
check  six  months  old  was  not  sufficiently  old  to  warrant  a 
bank's  refusal  to  pay.    The  account  of  the  depositor  as  of 
the  date  the  check  was  given  and  at  the  time  the  check  is 
presented  should  be  examined;  and,  of  course,  if  there  is 
not  sufficient  to  the  credit  of  the  maker,  the  bank  assumes 
the  risk  in  paying  such  a  check,  for  if  the  drawer  has  dis- 
charged the  debt  for  which  the  check  was  given,  the  bank 
could  not  recover  for  payment  made. 

97.  As  between  the  maker  of  the  check  and  one  who 
becomes  holder,  the  holder  assumes  the  risk  in  accepting  a 
check  when  it  is  stale.     All  the  circumstances  must  be  con- 
sidered in  determining  whether  it  is  stale.     In  one  case 
twenty-six  days  has  been  held  to  make  it  stale.     At  least 
four  or  five  days  usually  would  not  be  deemed  an  unrea- 
sonable time  to  give  a  check  to  circulate  to  the  drawee  bank. 


SEC.  98  69 

Lancaster  Bank  v.  Woodward,  18  Pa.,  357;  First  N.  B.  v. 
Needham,  29  Iowa,  249. 

98.  Post   Dated   Checks. — Ordinarily  a  check   is  pre- 
sumed to  be  drawn  against  funds  which  the  depositor  has 
in  bank.     If  he  issues  a  check  when  he  knows  he  has  no 
funds  to  meet  it  at  the  time,  he  may  do  it  either  because 
he  has  an  arrangement  with  the  bank  allowing  him  to  over- 
draw, or  he  commits  a  wrong.    See  Sec.  195.    He  is  not 
guilty  of  a  wrong,  however,  when  he  issues  a  post-dated 
check  (a  check  dated  ahead).     It  is  not  presumed  that  he 
has  funds  in  bank  to  meet  such  check  when  drawn,  but 
that  he  will  have  funds  there  to  meet  it  when  it  is  presented 
in  the  ordinary  course  of  business  at  the  time  of  its  date. 
Before  that  time  he  has  the  right  to  draw  other  checks 
against  his  deposit.     Even  though  the  bank  knows  of  the 
post-dated  check  outstanding,  it  cannot  refuse  to  pay  proper 
checks   on   demand.     The  bank  cannot   pay  or   certify   a 
post-dated  check  before  the  day  of  its  date.     Clark  N.  B. 
v.  Albion  N.  B.,  52  Barb.  (N.  Y.),  592.  If  it  does,  it  cannot 
charge  the  amount  to  the  depositor  if  he  countermands  or 
stops  payment  before  the  day  of  its  date. 

99.  Countermanding  or  Stopping  Payment. — It  is  the 
law  in  nearly  all  the  states  that  the  depositor  has  the  right 
to  countermand  checks,  or  stop  payment.     The  bank  must 
pay  only  on  the  order  of  the  depositor,  but  must  pay  every 
valid  order  presented  so  long  as  unincumbered  funds  are  to 
the  credit  of  the  depositor.     If  a  dispute  arise  between  the 
depositor  and  one  to  whom  he  has  given  a  check,  these  two 
must  settle  their  dispute  themselves  and  the  bank  should 
not  be  dragged  into  their  difficulty,  and,  therefore,  the  bank 
is  not  concerned  as  to  how  many  checks  are  outstanding, 
but  only  as  to  the  validity  of  the  check  as  it  is  .presented, 
unrevoked,  and  the  state  of  the  depositor's  account.    Where 
payment  is  stopped  on  a  check  the  bank  must  not  pay  such 
check  or  it  will  be  liable  to  the  depositor.     Elder  v.  Bank, 


70  SEC.  100 

55  N.  Y.  S.,  576.  Of  course,  where  the  bank  has  certified 
a  check  it  is  presumed  that  the  depositor  has  been  charged 
with  the  amount,  and  on  such  a  check  the  bank  is  liable 
itself  to  the  holder.  It  cannot  be  countermanded.  But  see 
Sec.  I3ib. 

100.  In  Illinois  it  has  been  held  that  a  check  cannot  be 
countermanded,  on  the  ground  that  it  is  a  fraud  for  the 
depositor,  after  issuing  a  check,  to  withdraw  the  money 
so  that  there  will  not  be  sufficient  to  meet  the  check,  and 
that  it  is  likewise  a  fraud  to  tell  the  bank  not  to  pay.     But 
suppose  the  bank  does  not  know  of  an  outstanding  check 
and  the  depositor  himself  demands  payment  of  his  entire 
balance?  The  bank  cannot  refuse  to  pay  him.   In  Illinois 
it  was  the  rule  that  where  A  drew  a  check  to  B,  B  could 
sue  the  bank,  as  the  check  was  regarded  as  an  assignment 
of  the  fund  to  the  one  to  whom  the  check  was  given. 
This  has  been  changed  by  the  Negotiable  Instruments  Law 
and,  as  was  the  rule  in  most  states  before,  and  is  the  rule 
now  where  the  Negotiable  Instruments  Law  is  in  force,  a 
check  is  not  an  assignment  of  the  fund,  and  the  money  in 
bank  belongs  to  the  depositor  until  the  bank  has  paid  it 
out  on  his  orders.     The  bank  owes  no  duty,  and  is  under 
no  legal  obligation,  to  the  holder  of  the  check,  unless  the 
bank  has  certified  it.    If  the  depositor  has  the  check  certified 
he  can  countermand  it  before  he  delivers  the  check,  but  if  he 
has  delivered  it,  or  if  the  bank  certifies  it  at  the  request  of 
the  holder,  it  cannot  be  countermanded,  as  the  bank  has 
promised  to  pay — it  is  now  the  obligation  of  the  bank.    But 
see  Sec.  I3ib. 

rooa.  A  cashier's  check  cannot  be  countermanded. 
Drinkall  v.  Movius  State  Bank,  n  N.  D.,  10;  88  N.  W, 
724. 

101.  Revocation  by  Death. — It  is  generally  held  that 
the  death  of  the  depositor  revokes  checks  drawn  by  him 
and  delivered  but  not  paid.    On  the  death  of  the  depositor 


SEC.  102  71 

the  money  in  bank  passes  to  his  executor  or  administrator 
at  the  instant  of  his  death,  for  distributon  under  the  law  of 
the  state  where  he  is  domiciled,  subject  to  the  rights  of 
creditors.  If  the  bank  knows  of  his  death  it  will  certainly 
be  liable  to  the  estate  if  it  pays  a  check  thereafter,  unless  it 
has,  by  certifying,  become  debtor  to  the  holder  and  not  to 
the  depositor;  and  it  has  been  held  in  most  cases  that  the 
death  of  the  drawer  revokes  all  unaccepted  checks.  If  the 
money  in  bank  is  the  depositor's  money  until  the  bank  has 
actually  paid  it  out,  and  the  death  of  the  depositor  itself 
passes  the  title  of  his  property  to  his  representative,  it 
follows  that  the  effect  must  be  the  same  on  the  deposit  as 
on  any  other  personal  property.  See  Sees.  177,  178. 

Where  the  check  operates  as  an  assignment,  the  money 
represented  passes  at  the  time  of  the  assignment  and  is  no 
longer  the  depositor's ;  but  checks  are  generally  not  regarded 
as  asisgnments  now.  In  some  states  a  certain  time  after 
death  of  drawer  is  given  in  which  to  present  checks.  Natl. 
Com.  Bk.  v.  Miller  &  Co.,  77  Alabama,  168. 

1 02.  Revocation  by  Insolvency. — Insolvency  of  the 
drawer  revokes  all  checks  not  paid,  in  those  states  where  a 
check  is  not  regarded  as  an  assignment,  and  also  under  the 
United  States  Bankruptcy  Law.  Bowker  v.  Haight  & 
Freeze  Co.,  146  Fed.,  257,  and  see  146  Fed.,  761. 


72  SEC.  103 


CHAPTER  VI. 
PAYMENT  OF  CHECKS. 

103.  Payment  When  Presented. — A  bank  must  pay  the 
checks  in  the  order  in  which  they  are  presented,  regardless 
of  the  dates.     If  A,  having  $100  in  bank,  gives  B  a  check 
for  $100  on  the  ist  of  the  month,  and  on  the  2d  A  goes 
to  the  bank  and   presents   his  check  for  the  $100,   even 
though  the  bank  knows  of  the  outstanding  check  in  B's 
hands,  it  must  pay  to  A,  except  where  a  check  operates  as 
an  assignment.     Bank  v.  Ingersoll,  2  Neb.,  617;  Dykers  v. 
Bank,  n  Paige  (N.  Y.),  612. 

104.  No  matter  how  many  hands  a  check  passes  through, 
the  bank  must  pay  it. 

105.  When  the  check  is  presented  at  the  bank  and  the 
money  is  passed  over  the  counter,  to  one  other  than  the 
maker  (or  depositor  who  drew  it)  and  accepted  by  him, 
the  holder  is  absolute  owner  of  the  money.     If  the  bank 
afterwards  finds  the  depositor's    balance    was    not    large 
enough  to  meet  it,  and  cannot  recover  from  the  maker  on 
the  overdraft,  it  is  the  bank's  loss,  unless  there  is  fraud 
or  collusion  on  the  part  of  the  payee,  or  holder,  as  where 
he  presents  a  check  when  he  knows  that  the  drawer  has  no 
funds.     Bank  v.  Burns,  68  Ala.,  600.     Where  payment  is 
made  and  accepted  in  good  faith  the  money  becomes  the 
property  of  the  payee  or  holder.     Bank  v.  Berrall,  70  N.  J. 
Law,  757,  where  check  was  paid  after   revocation.     See 
Sec.  113.     It  could  not  be  attached  as  the  depositor's. 

106.  If  a  check  is  presented  for  more  than  the  depositor 
has  to  his  credit  the  bank  is  not  bound  to  pay  what  it  has, 


SEC.  107  73 

but  if  it  does  it  should  indorse  on  the  check  the  amount 
paid,  if  check  is  not  surrendered.    See  Sec.  137. 

107.  The  fact  that  the  bank  has  previously  allowed  over- 
drafts will  not  obligate  it  to  pay  a  check  in  full  when  the 
drawer  has  not  sufficient  funds.     If  several  checks  are  pre- 
sented at  the  same  time,  as  through  a  clearing  house,  and 
there  are  sufficient  funds  to  pay  one  but  not  all,  in  some 
places  it  is  the  custom  to  refuse  all,  and  upon  a  second 
presentation  pay  the  first  presented;  in  others  the  custom 
is  to  pay  the  first  in  date;  and  in  still  others  to  pay  the 
smaller  ones,  though  the  bank  is  not  bound  to  pay  any  when 
they  aggregate  more  than  the  balance  to  the  credit  of  the 
depositor. 

1 08.  If  a  check  is  presented  and  payment  refused  for 
lack  of  sufficient  funds,  the  bank  may  in  most  jurisdictions 
disregard  the  check,  and  can  treat  funds  deposited  or  checks 
presented  afterwards  without  reference  to  the  order  re- 
fused.    Gilliam  v.  Merchants  Nat.  Bank,  70  111.  App,  592. 

109.  The  only  duty  the  bank  owes  is  to  pay,  upon  pre- 
sentation, all  checks  properly  drawn  against  an  unencum- 
bered balance.     It  need  do  nothing  else.     So  it  is  not  bound 
to  certify,  or  to  promise  that  it  will  keep  out  funds  when 
received.     It  need  not  answer  questions  regarding  the  de- 
positor's account.    Though  it  has  been  held  in  Kansas  that 
the  bank  can  be  made  to  disclose  the  state  of  the  depositor's 
account,  this  was  in  a  case  where  the  disclosure  was  to  the 
grand  jury  in  considering  an  indictment.     Of  course,  if  a 
bank  does  accept  a  check,  or  certifies,  or  promises  to  do 
something  beyond  merely  making  immediate  payment,   it 
may  become  bound,  but  it  is  not  otherwise  under  obliga- 
tions to  do  more  than  pay  it. 

no.  A  payment  in  forged  or  counterfeit  paper  or  money 
would  be  no  payment  at  all;  payment  must  be  in  legal  ten- 
der, in  the  absence  of  any  special  contract  between  the 
depositor  and  the  bank.  See  Sec.  203. 


74  SEC.  Ill 

in.  If  a  bank  pays  a  check  by  issuing  its  own  draft, 
which  is  not  paid,  this  is  no  payment  of  the  check,  unless 
expressly  accepted  as  payment. 

112.  Generally  when  a  bank  receives  as  a  deposit  by  A  a 
check  drawn  on  itself  by  B,  and  credits  the  depositor  (A) 
with  the  amount,  this  is  payment  of  the  check,  the  same 
as   if  the  money  had  been  handed   out   and   immediately 
deposited  again  by  the  one  to  whom  paid  (A).     Bryan  v. 
First  N.  B.,  205  Pa.,  7 ;  Consolidated  N.  B.  v.  First  N.  B., 
114  N.  Y.  S.,  308.     It  certainly  is  payment  where  the  draw- 
er's account  is  charged  and  the  depositor's  account  credited, 
and  in  some  states,  charging  it  to  the  drawer  operates  as 
payment.    O.  A.  Smith  Co.  v.  Mitchell  (Ga.),  45  S.  E.,  47. 

113.  Mistake. — It   is  a   general   principle  of  law  that 
money  paid  out  under  a  mistake  of  fact  can  be  recovered. 
But  a  bank  knows,  or  can  ascertain,  the  state  of  a  depos- 
itor's account,  and  if  it  pays  out,  on  his  check,  more  than 
he  has  to  his  credit,  it  cannot  recover  from  the  bona  fide 
holder  to  whom  it  has  paid.     Mfrs.  Bank  v.  Swift,  70  Md., 
575.     While  it  may  recover  from  the  depositor  whose  ac- 
count it  has  allowed  to  become  overdrawn,  this  recourse  will 
not  be  allowed  it  where  the  mistake  was  the  bank's,  and  no 
fault  or  neglect  of  the  depositor,  if  the  depositor  by  being 
held  would  suffer  a  loss  which  he  would  not  have  sustained 
if  the  bank  had  not  made  the  mistake.     Of  course,  if  any 
fraud   or  concealment  on  the  part  of   any  one  could  be 
shown,  the  payee,  the  bank,  or  the  depositor,  as  the  case 
might  be,  could  enforce  a  correction  of  the  mistake. 

In  some  states  it  is  held  that  the  money  can  be  recovered 
in  any  case  where  the  bank  was  not  required  to  pay  and  the 
payee  has  not  altered  his  position.  Northampton  N.  B.  v. 
Smith,  169  Mass.,  281. 

114.  If  a  bank  by  mistake  credits  as  a  deposit  an  item 
taken  only  for  collection,  or  by  the  error  of  a  correspondent 
bank,  or  of  one  of  its  clerks,  credits  as  paid  an  item  not 


SEC.  115  75 

actually  paid,  such  a  mistake  can  be  corrected  if  the  de- 
positor would  not  be  placed  in  a  worse  position  than  if  the 
mistake  had  not  been  made. 

115.  We  have  noted  before  that  a  bank  should  not  pay  a 
post-dated  check  until  the  day  of  its  date.     Sec.  98. 

116.  The  check  must  be  paid  to  the  rightful  owner,  other- 
wise the  bank  may  suffer  the  loss,  whether  it  can  recover 
from  the  one  who  received  the  money  or  not.     Where  the 
depositor  has  been  negligent  and  a  bona  fide  holder  has 
received  the  money,  the  depositor  must  stand  the  loss. 

A  bank  can  not  intentionally  allow  an  overdraft,  or  falsely 
certify  a  check,  and  then  claim  it  was  a  mistake. 

117.  It  has  been  held  that  when  payment  is  made,  it  will 
not  be  presumed  that  such  payment  was  a  mistake,  but 
rather  that  the  bank  meant  to  pay  it  on  the  credit  of  the 
maker.     If  the  bank  paid  it  trusting  that  he  would  make  his 
account  good,  it  was  not  a  mistake  at  all.     Whiting  v.  City 
Bank,  77  N.  Y.,  at  367. 

It  has  been  held  in  Pennsylvania  that  where  money  is 
paid  under  a  bona  fide  forgetfulness  of  facts,  it  can  be 
recovered  even  though  the  facts  were  in  the  knowledge  of 
the  bank,  as  where  it  could  satisfy  itself  as  to  the  depositor's 
account  before  it  paid  a  note  made  by  him.  Meredith  v. 
Haines,  14  Pa.  Weekly  Notes,  364. 

Whether  there  has  actually  been  a  mistake  must  in  most 
cases  be  a  question  of  fact  for  the  jury.  Where  the  facts 
are  known,  a  payment  made  under  a  mistake  of  law  cannot 
be  recovered,  as  where  a  bank  pays  money  to  A,  an  execu- 
tor, thinking  A  is  entitled  to  it,  when  legally  it  belongs  to 
someone  else.  In  such  case  if  it  pays  to  A,  and  A  believes 
he  is  entitled  to  it  and  has  altered  his  position,  as  by  paying 
the  money  to  the  creditors  of  the  estate,  it  cannot  be  recov- 
ered back  from  A,  though  by  reason  of  its  mistake  the  bank 
may  be  liable  to  the  true  owner  also.  If  an  actual  mistake 
is  made,  not  involving  any  negligence  of  the  bank,  or  any 


76  SEC.  118 

omission  to  inform  itself  when  it  is  in  a  better  position  to 
learn  the  facts  than  the  other  party,  the  mistake  can  be 
corrected.  And  it  has  been  held  that  even  where  the  bank 
is  negligent,  if  the  payee  was  negligent  equally  with  the 
bank,  or  more  so,  the  bank  can  recover.  All  the  facts  of 
each  particular  case  must  be  considered.  The  bank  must 
pay  to  the  right  person.  If  it  pays  the  wrong  one  it  can 
recover  back  from  one  who  has  committed  a  fraud  or  for- 
gery, if  there  is  anything  to  recover,  but  not  from  an  inno- 
cent holder  who  has  changed  his  position  by.  having  had  a 
check  honored ;  and  it  will  always  be  still  liable  to  the  depos- 
itor if  he  has  not  by  his  own  fault  brought  about  a  mistaken 
or  wrongful  payment. 

CERTIFICATION. 

1 1 8.  Purpose  of  Certification. — If  A  owes   B  a  debt, 
B  is  entitled  to  receive  in  payment  of  his  debt  money.     He 
need  not  accept  a  check.     But  the  check  is  such  convenient 
medium  of  payment  that  it  would  be  considered  a  hardship 
if  all  payments  had  to  be  made  in  money,  and  the  confidence 
which  one  man  has  in  another  induces  the  acceptance  of  a 
check  as  payment  in  most  transactions.     Sometimes,  how- 
ever, the  party  who  takes  the  check  desires  to  be  certain  as 
to  whether  the  drawer  has  funds  in  the  bank,  and  requests 
the  drawer  to  have  the  check  certified.     Or  it  may  be  that, 
having  received  a  check,  he  desires  to  use  it  as  cash,  and  to 
make  it  pass  more  readily  as  money,  he  himself  has  it  cer- 
tified by  the  bank  on  which  it  is  drawn.     Certification  is  the 
acceptance,  by  the  bank,  of  the  check. 

119.  Must  Be  in  Writing.— The    Negotiable    Instru- 
ments Law  provides  that  an  acceptance  must  be  in  writing, 
and  when  it  is  in  a  separate  writing  no  liability  arises  in 
favor  of  anyone  except  those  to  whom  the  acceptance  is 
shown,  and  who,  on  the  faith  thereof,  receive  the  check  or 
bill  for  value. 


SEC.  120  77 

And  in  States  where  the  Negotiable  Instruments  Law 
has  not  been  enacted  there  are  usually  statutes  which  pro- 
vide that  the  acceptance  shall  be  in  writing.  Otherwise  it 
may  be  verbally  made. 

120.  Generally  certification  is  merely  the  marking,  stamp- 
ing, or  writing  on  the  check  "Good,"  or  "Certified,"  or  any 
words  indicating  that  it  is  "certified  as  good,"  and  the  sig- 
nature of  the  bank,  by  the  officer  certifying. 

121.  Who  May  Certify. — The  power  to  certify  will  be 
in  such  officer  or  officers  as  the  directors  appoint  for  that 
purpose,  but  when  a  check  is  certified  by  any  officer  of  a 
bank  whom  the  customers  have  a  right  to  believe  has  the 
power  to  certify,  the  bank  will  be  bound. 

If  customers  deal  with  the  president,  cashier,  or  paying 
teller,  and  any  one  of  these  officers  certifies,  and  the  party 
procuring  the  certification  knows  of  no  limitation  on  the 
power  of  the  officer,  the  bank  will  be  liable.  In  Massachu- 
setts, in  an  early  case,  it  was  held  that  the  teller  of  a  bank 
had  no  authority  to  certify  simply  because  he  was  a  teller, 
even  though  it  had  been  the  custom  for  Massachusetts 
bank  tellers  to  certify.  It  is  generally  regarded  as  a  pow- 
er inherent  in  the  cashier,  and  as  the  paying  teller  has 
charge  of  the  payment  of  checks,  it  would  doubtless  bind 
the  bank  were  he  to  certify,  in  the  absence  of  proof  that 
the  party  procuring  certification  knew  of  his  lack  of 
power.  Generally  the  paying  teller  has  such  authority. 

122.  What  Checks. — Only  such  checks  can  be  certified 
as  are  drawn  in  the  ordinary  course  of  business.     A  post- 
dated check,  or  a  check  drawn  simply  for  the  one  named 
as  payee  to  hold  as  collateral,  could  not  render  the  bank 
liable  by  the  unauthorized  certification  of  the  cashier.     But 
a  check  bearing  no  notice  of  being  irregular,  when  certified, 
becomes  the  obligation  of  the  bank  to  the  holder. 

123.  An  officer  of  the  bank  cannot  certify  his  own  check, 
unless  he  has  been  given  authority  to  do  so,  and  one  who 


78  SEC.  124 

takes  such  a  check  would  do  well  to  inquire  as  to  his  au- 
thority; for  if  the  certification  is  false  the  bank  cannot  be 
bound  by  such  unauthorized  act.  Of  course,  if  the  officer's 
acts  in  so  certifying  are  ratified,  or  not  objected  to  by  the 
directors  when  they  know  he  is  exceeding  his  authority, 
their  acquiescence  will  make  the  bank  liable  when  the  ques- 
tion is  whether  the  bank  or  an  innocent  holder,  who  had 
reason  to  believe  the  officer  had  such  authority,  should 
suffer.  An  officer  of  a  bank  should  not  certify  the  check 
of  another  officer  on  his  bank. 

124.  Effect  of  Certification. — The  certification  is  equiv- 
alent to  the  bank's  saying  that  the  signature  of  the  drawer 
is  genuine;  that  the  drawer  has  on  deposit  funds  sufficient 
to  meet  the  check;  that  the  amount  of  the  check  has  been 
set  apart  by  the  bank  and  that  this  fund  will  be  used  to 
satisfy  the  check  whenever  it  is  presented.     Bank  v.  Baird, 
1 60  Fed.,  642. 

125.  Certification  Procured  by  Drawer. — When  a  de- 
positor draws  a  check  and  has  it  certified  by  the  bank  before 
he  delivers  it,  the  depositor  and  the  bank  are  liable  on  the 
check,  but  the  depositor  is  liable  only  to  the  same  extent 
as  on  an  ordinary  check.     The  effect  is  the  additional  lia- 
bility of  the  bank  on  the  check.     A  case  decided  by  the 
Supreme  Court  of  the  United  States  contains  a  statement 
to  the  effect  that  whether  the  certification  is  procured  by 
the  maker,  before  delivery,  or  by  the  holder,  is  "of  no  im- 
portance."    First  Nat.  Bank  v.  Whitman,  94  U.  S.,  343. 
Whether  merely  of  no  importance  to  the  case  under  con- 
sideration or  whether  the  court  meant  to  say  that  as  a  gen- 
eral rule  it  is  of  no  importance,  is  not  clear,  but  as  this 
point  was  not  really  before  the  court  for  decision,  this  state- 
ment was  only  dictum.    The  New  York  court  has  followed 
this  case  in  one  of  its  later  decisions,  but  there  also  the 
question  was  not  itself  involved  and  the  distinction  not 
referred  to.    It  would  seem  that  unless  the  holder  requested 


SEC.  126  79 

the  certification,  he  ought  not  to  be  bound  to  a  release  of 
the  maker  just  because  the  maker  has  requested  the  certifica- 
tion to  add  to  the  credit  which  will  be  given  on  the  check.  If 
the  bank  fails  before  the  check  can  be  duly  presented,  the 
holder  in  such  case  has  less  recourse  than  he  would  have 
if  the  check  had  not  been  certified ;  for  in  the  latter  event 
the  check  not  being  payment  until  actually  paid,  the 
holder  could  go  against  the  drawer.  Should  he  be  de- 
prived of  this  right  simply  because  the  maker  has  pro- 
cured a  certification  which  was  more  for  his  benefit  than 
that  of  the  holder? 

126.  Certification  Procured  by  Holder. — The   Negoti- 
able Instruments  Law  now  provides  that  where  a  check 
has  been  delivered  by  the  depositor,  and  its  certification  is 
afterward  procured  by  the  holder,  the  drawer  and  endorsers 
then  on  the  check  are  released  from  all  liability  and  the 
bank  becomes  debtor  for  the  amount  to  any  holder  in  due 
course,  on  the  theory,  if  not  in  consequence  of  the  actual 
fact,  of  the  bank's  having  set  aside  from  the  depositor's 
funds  the  amount  of  the  check,  for  the  holder.     The  de- 
positor's right  is  to  have  the  check  presented  for  payment 
and  not  for  acceptance  or  certification.     Usually  the  amount 
is  charged  to  the  depositor  and  credited  to  a  "Certified 
Check  Account,"  or  in  some  other  way  carried  in  a  sepa- 
rate account  on  the  books. 

127.  Bank  Debtor  for  Amount. — As  between  the  holder 
of  the  certified  check  and  the  bank,  the  bank  is  liable  to  him 
as  to  an  ordinary  depositor.     It  is  debtor  for  the  amount. 
People  v.  St.  Nicholas  Bank,  58  N.  Y.  St.,  712.      And  it  is 
liable  on  its  certification  whether  the  transfer  has  actually 
been  made  on  the  books  or  not.     The  holder  is  not  con- 
cerned with  the  bookkeeping  of  the  bank. 

128.  Statute   of   Limitations. — The   statute   of   limita- 
tions is  generally  held  not  to  run  against  the  amount  until 


80  SEC.  129 

the  payment  of  the  certified  check  is  refused  by  the  bank. 
Bank  v.  Bank,  39  Penn.  State,  92. 

129.  Certifying. — Care  should  be  exercised  by  the  bank 
in  certifying  checks.     If  a  mistake  is  made  and  a  check 
certified  for  more  than  the  depositor  has  to  his  credit,  while 
the  mistake  can  be  corrected  if  no  one  has  been  injured, 
the  bank  will  be  liable  to  an  innocent  holder;  and  so  if  it 
certifies  a  forged  check  it  will  have  to  answer  to  an  innocent 
holder.     Adam  v.  Mfrs.  &  Tr.  Nat.  Bank,  116  N.  Y.  S., 
595.     When  it  certifies  it  guarantees  the  genuineness  of  the 
drawer's  signature  but  not  endorsements.  Even  though  an 
officer  falsely  certify  a  check  the  bank  will  be  liable.     But 
where  a  national  bank  promises  that  it  will  pay  all  checks 
presented,  regardless  of  the  date  or  amount,  this  is  a  guar- 
anty of  the  debt  of  a  third  party,  which  a  national  bank 
has  no  power  to  make,  and  which,  therefore,  cannot  bind 
the  bank,  as  the  one  to  whom  the  promise  was  made  must 
know  that  the  bank  has  not  the  power. 

130.  Raised  Checks. — If  a  check  is  raised  after  it  has 
been  certified,  the  bank  will  not  be  liable  to  a  bona  fide 
holder  for  more  than  the  amount  certified,  and  if  it  pays  the 
excess  it  can  recover  it,  provided  an  innocent  party  to  whom 
it  paid  has  not  been  placed  in  a  position,  by  its  payment, 
which  would  impose  a  loss  upon  him  which  he  would  not 
have  incurred  had  payment  been  refused  when  demanded. 
The  bank  does  not  guarantee,  when  it  certifies,  that  the 
writing  in  the  body  of  the  check  is  genuine.     And  when  a 
bank  certifies  a  check  the  amount  of  which  has  been  raised 
since  the  check  was  made,  but  before  certification,  the  bank, 
if  not  negligent,  should  not  be  held  liable  to  the  holder;  and 
if  it  pays  on  the  instrument,  should  be  allowed  to  recover 
the  amount  in  excess  of  the  original  sum.    Of  course,  if  the 
bank  is  negligent,  it  must  answer  to  the  holder,  and  cannot 
recover  if  the  mistaken  payment  is  due  to  its  own  fault. 
Where  payment  of  a  raised  certified  check  has  been  made 


SEC.  131  81 

by  another  bank  and  paid  to  that  bank  by  the  certifying 
bank,  the  certifying  bank,  upon  discovering  that  the  check 
has  been  raised,  can  proceed  for  a  return  of  the  money 
paid,  either  against  the  bank  which  paid  it  or  the  holder 
who  received  the  money.  Before  bringing  an  action  the 
bank  should  tender  the  instrument  and  demand  a  return 
of  the  money.  See  Sec.  138. 

131.  Promise  to  Accept  in  Future. — It  has  been  held 
that  if  a  bank  promises  to  accept  checks  at  a  future  day, 
such  acceptance  is  valid,  but  it  must  be  for  acceptance 
within  a  reasonable  time.  What  is  a  reasonable  time  is  a 
question  of  fact  to  be  determined  in  view  of  all  the  circum- 
stances of  each  particular  case.  It  has  been  held  in  Iowa 
that  seventy  days  was  not  unreasonable. 

I3ia.  Inquiry  Regarding  Checks. — If  Bank  A  certifies 
a  check  drawn  by  X,  and  subsequently  the  bank  is  asked 
whether  a  certain  check  drawn  by  X  and  certified  by  it  is 
all  right,  what  is  the  liability  of  the  bank  to  the  holder? 
The  courts  differ  on  this  question,  but  from  the  facts  of 
each  particular  case  they  cannot  be  said  to  conflict.  As  the 
bank  can  ascertain  whether  the  amount  of  the  check  is  the 
same  as  when  it  certified,  and  it  is  held  to  know  the  state 
of  the  depositor's  account  and  his  signature,  if  care  is  ex- 
ercised by  the  one  making  the  inquiry,  and  due  diligence  on 
the  part  of  the  bank,  liability  and  hardship  can  be  avoided. 
The  question  will  be  one  of  fact  as  to  whether  the  bank 
simply  meant  that  a  certification  had  actually  been  made,  or 
whether  it  meant  that  the  amount  shown  at  the  time  inquiry 
was  made  was  correct.  Where  an  inquiry  is  made  by  tele- 
graph or  telephone,  and  the  officer  who  answers  the  inquiry 
does  not  see  the  check,  his  statement  that  it  is  all  right  has 
been  held  to  refer  merely  to  the  genuineness  of  the  signa- 
ture and  the  sufficiency  of  the  fund  to  the  credit  of  the 
depositor  to  meet  the  amount  stated  in  the  check  at  the 
time  it  was  certified. 


82  SEC.  131b 

If  a  check  is  left  with,  or  sent  to,  a  bank,  with  an  inquiry 
as  to  whether  it  is  good,  the  mere  retention  of  the  check 
by  the  bank  will  not  in  itself  operate  as  a  certification  or 
acceptance.  Matteson  v.  Moulton,  79  N.  Y.,  627;  Craw- 
ford's Annotated  Neg.  Ins.  Law.,  p.  155.  A  recent  Penn- 
sylvania case  holds  that  where  a  bank  delayed  for  two  days 
before  refusing  check  it  was  equivalent  to  an  acceptance 
under  the  Negotiable  Instruments  Law,  which  provides  that 
where  acceptance  is  not  made  within  twenty-four  hours  or 
refused,  the  drawer  will  be  held  to  have  accepted.  Wisner 
v.  Bank,  68a,  955.  But  a  check  is  usually  not  presented  to 
a  bank  for  acceptance,  but  for  payment.  As  the  bank  has 
a  right  to  investigate  the  depositor's  account  and  the  gen- 
uineness of  the  signature,  it  should  have  a  reasonable  time 
to  ascertain  these  facts.  But  due  diligence  should  be  ex- 
ercised in  answering  such  inquiries  when  made  by  letter  or 
telegraph.  If  a  check  is  simply  left  with  the  bank,  the  one 
who  has  left  it  should  be  diligent  in  applying  for  the  bank's 
answer  to  his  inquiry.  After  a  reasonable  time  the  bank 
should  either  pay  the  check  or  advise  him  of  its  worthless- 
ness.  But  the  bank  is  under  no  obligation  to  put  itself  out 
for  the  purpose  of  conducting  an  information  bureau. 

I3ib.  After  a  certified  check  has  been  delivered,  it  cannot 
be  countermanded ;  but  before  delivery  the  maker  can  have 
the  check  canceled  and  the  amount  again  placed  to  his 
credit.  And  the  bank  can  countermand,  or  cancel,  the  cer- 
tification, if  the  one  for  whom  it  was  certified  has  not  de- 
livered the  check  or  has  not  acted  to  his  detriment  by  reason 
of  the  certification ;  but  where  in  the  hands  of  a  bona  fide 
holder  it  can  not  be  countermanded.  First  N.  B.  v.  Union 
Trust  Co.  (Mich.),  122  N.  W.,  547. 

No  matter  what  position  the  bank  may  be  in,  it  cannot 
charge  the  depositor  for  any  certification  where  it  could  not 
charge  him  with  payment.  See  Sec.  142. 


SEC.  131c  83 

1310.  False  Certification. — Section  5208  of  the  Revised 
Statutes  of  the  United  States  provides  as  follows: 

"It  shall  be  unlawful  for  any  officer,  clerk,  or  .agent  of  any 
national  banking  association  to  certify  any  check  drawn  upon  the 
association  unless  the  person  or  company  drawing  the  check  has  on 
deposit  with  the  association,  at  the  time  such  check  is  certified,  an 
amount  of  money  equal  to  the  amount  specified  in  such  check.  Any 
check  so  certified  by  duly  authorized  officers  shall  be  a  good  and 
valid  obligation  against  the  association;  but  the  act  of  any  officer, 
clerk,  or  agent  of  any  association,  in  violation  of  this  section,  shall 
subject  such  bank  to  the  liabilities  and  proceedings  on  the  part  of 
the  Comptroller  as  provided  for  in  section  fifty-two  hundred  and 
thirty-four." 

Section  5234  provides  that  the  Comptroller  of  the  Cur- 
rency may  appoint  a  receiver  to  wind  up  the  affairs  of  the 
bank. 

It  will  be  noted  that,  while  false  certification  is  punished, 
if  the  officer  has  authority  to  certify,  but  wrongfully  certi- 
fies, the  bank  becomes  liable  on  the  check.  The  Act  of 
Congress  of  July  12,  1882,  provides  as  follows : 

"Sec.  13. — That  any  officer,  clerk,  or  agent  of  any  national  banking 
association  who  shall  willfully  violate  the  provisions  of  an  act  en- 
titled 'An  act  in  reference  to  certifying  checks  by  national  banks,' 
approved  March  third,  eighteen  hundred  and  sixty-nine,  being 
section  fifty-two  hundred  and  eight  of  the  Revised  Statutes  of  the 
United  States,  or  who  shall  resort  to  any  device,  or  receive  any 
fictitious  obligation,  direct  or  collateral,  in  order  to  evade  the  pro- 
visions thereof,  or  who  shall  certify  checks  before  the  amount  thereof 
shall  have  been  regularly  entered  to  the  credit  of  the  dealer  upon 
the  books  of  the  banking  association,  shall  be  deemed  guilty  of  a 
misdemeanor,  and  shall,  on  conviction  thereof  in  any  circuit  or 
district  court  of  the  United  States,  be  fined  not  more  than  five 
thousand  dollars,  or  shall  be  imprisoned  not  more  than  five  years,  or 
both,  in  the  discretion  of  the  court." 

Most  of  the  states  also  have  statutes  making  it  a  crime 
to  falsely  certify  checks. 

See  Thompson  v.  St.  Nicholas  Natl.  Bank,  146  U.  S., 
240;  Chadwick  v.  U.  S.,  141  Fed.,  225;  U.  S.  v.  Heinze, 
161  Fed.,  425. 

13 id.  But  where  a  holder  procures  certification  with  no- 


84  SEC.  131e 

tice  of  facts  which  make  the  certification  dishonest,  he  is  not 
a  bona  fide  holder.  First  Natl.  Bank  v.  Union  Trust  Co. 
(Mich.),  122  N.  W.,  547. 

1316.  Memorandum  Check. — A  memorandum  check  is  a 
check  given  by  the  drawer  to  the  payee  named  therein, 
not  to  be  presented  at  the  bank  for  payment,  but  as  evi- 
dence of  an  obligation  of  the  drawer  to  the  payee,  or  as 
a  memorandum  of  the  indebtedness.  It  may  be  marked 
"Memorandum,"  or  "Memo,"  and  so  marking  it  makes  it 
a  memorandum  check.  The  payee  can  proceed  against 
the  drawer  as  on  a  note,  and  need  not  present  it  at  the 
bank.  But  if  he  does  present  it  and  the  bank  pays  it 
the  maker  will  be  liable  to  the  bank.  The  words  "Memo- 
randum," or  "Memo"  the  bank  need  pay  no  attention  to. 
As  between  the  drawer  and  the  bank  it  is  the  same  as  any 
other  check.  As  between  the  drawer  and  the  payee  it 
is  a  "due  bill,"  and  if  the  payee  uses  it  contrary  to  his 
agreement  with  the  drawer,  he  becomes  liable  to  the 
drawer.  As  to  other  parties  to  whom  it  is  negotiated 
the  drawer  is  liable  as  on  a  note,  and  presentation  at  the 
bank  is  not  necessary  to  bind  him,  as  he  did  not  intend 
that  it  should  be  presented.  Franklin  Bank  v.  Free- 
man (Mass.),  16  Pick.,  535;  Cushing  v.  Gore,  15  Mass., 
68;  Dykers  v.  Bank,  11  Paige  (N.  Y.),  612. 


SEC.  132  85 

CHAPTER   VII. 
NONPAYMENT  AND  MISPAYMENT. 

132.  Refusal  to  Pay. — When  a  depositor  draws  a  check 
against  an  account  actually  sufficient  to  meet  it,  the  bank 
must  pay.     If  it  dishonors  a  check,  it  makes  itself  liable: 
in  some  states  to  the  depositor  only ;  in  others  to  the  holder 
of  the  check.     As  in  most  states  a  check  is  not  an  assign- 
ment, the  majority  of  courts  hold  that  no  one  has  a  right 
against  the  bank  except  the  maker  of  the  check,  unless  the 
bank  has  accepted  or  certified.     It  has  been  held  in  some 
states  that  where  a  check  is  paid  to  the  wrongful  holder, 
this  is  equivalent  to  an  acceptance  of  the  check  of  the  draw- 
er and  gives  the  real  owner  a  right  against  the  bank;  but 
this  is  not  the  rule  in  most  states;  and  the  Negotiable  In- 
struments Law  provides  that  an  acceptance  must  be  in  writ- 
ing, so  that  a  wrongful  payment  might  not  now  be  held  to 
be  an  acceptance  under  that  law. 

133.  Must  Answer  to  Depositor. — But  to  the  depositor 
the  bank  must  answer,  if  it  refuses  to  pay  his  orders  so 
long  as  it  has  funds  of  his  sufficient  to  meet  the  orders. 
As  we  have  seen,  there  is  an  implied  contract  that  the  bank 
will  honor  his  orders.     A  bank  may  have  just  reason  to  re- 
fuse to  pay,  as  where  it  has  a  lien  or  right  to  set  off  the 
depositor's  balance  against  a  debt  which  he  owes  the  bank. 
See  Sec.  165.     But  where  he  actually  has  sufficient  unin- 
cumbered  funds,  the  bank  must  pay.     If  the  deposit  has 
been  attached,  or  the  bank  enjoined  from  paying,  it  can 
of  course  refuse  to  pay.     Zimmerman  v.  Murphy,  131  111. 
App.,  56. 

134.  Amount  of  Damages — A  refusal  to  pay  gives  the 


86  SEC.  134 

depositor  a  right  of  action  against  the  bank,  for  damages. 
In  what  amount  the  damages  will  be  laid  depends  upon  all 
the  facts  and  circumstances.  If  there  is  anything  to  in- 
dicate that  the  conduct  of  the  bank  was  wilful,  or  that  it 
delayed  to  make  reparation,  the  bank  would  be  liable  not 
only  for  the  amount  involved  in  the  dishonored  paper  and 
interest  thereon,  for  which  it  will  always  be  liable,  but 
also  for  such  damages  as  a  jury  might  find  were  suffered 
by  the  party  in  the  harm  done  his  credit,  his  reputation, 
business,  etc. 

An  innocent  mistake  on  the  part  of  a  clerk  has  been  held 
to  give  no  ground  for  the  jury  to  "mulct  the  bank,"  though 
in  that  case  $600  damages  was  awarded  for  refusal  to  pay 
checks  aggregating  $318.  Though  no  actual  damage  is 
shown,  usually  nominal  damages,  i.  e.,  in  an  amount  to 
give  the  depositor  at  least  something,  perhaps  only  the 
interest  on  the  amount,  for  the  wrong  done  him,  can  be 
recovered.  Sometimes  a  jury  might  be  warranted  in  find- 
ing one  dollar,  one  cent,  etc.  All  the  circumstances  must 
be  weighed. 

When  no  real  loss  is  incurred,  no  wilful  refusal  on  the 
part  of  the  bank  is  shown,  and  the  check  is  finally  paid, 
only  nominal  damages  can  be  recovered.  However,  a  de- 
positor will  usually  be  given  substantial  damages,  over  and 
above  the  actual  amount  of  the  checks  unpaid  and  interest, 
when  a  bank  without  just  cause  refuses  to  pay  his  checks, 
even  though  no  special  damage  is  shown.  Clark  v.  Bank, 
83  N.  Y.  S.,  447.  Such  a  refusal  is  bound  to  work  harm  to 
the  one  whose  check  is  dishonored.  Some  cases  have  held 
that  where  the  check  of  one  engaged  in  trade  is  wrongfully 
dishonored  the  bank  is  liable,  but  later  cases  make  the  bank 
liable  even  where  the  depositor  is  not  engaged  in  trade.  His 
credit,  reputation,  and  standing  are  as  susceptible  to  injury 
through  a  refusal  to  pay  as  the  character  of  one  engaged 
in  commercial  pursuits.  Sometimes  the  smaller  the  check, 


SEC.  135  87 

the  greater  the  injury  done.  The  jury  must  determine 
from  all  the  circumstances  what  damages  have  been  in- 
curred. The  wrong  done  is  in  the  nature  of  a  slander, 
besides  being  a  breach  of  contract,  and  any  special  damages 
suffered  can  always  be  recovered  when  proved.  Generally 
nominal  damages  only  can  be  recovered  in  an  action  on  the 
contract,  unless  special  damages  can  be  proved,  but  in  a 
tort  action  for  the  wrong  done,  substantial  damages  can  be 
recovered  in  any  event.  Where  the  bank  has  not  been  neg- 
ligent, and  where  upon  discovering  its  mistake  it  imme- 
diately takes  steps  to  correct  same,  the  court  will  not  allow 
an  excessive  verdict.  The  check  must  have  been  presented 
at  the  bank,  during  business  hours,  and  payment  actually 
refused.  The  mere  privilege  given  a  depositor,  to  draw 
against  items  deposited  for  collection,  does  not  give  him 
an  absolute  right  to  draw,  and  if  items  are  not  paid  the 
bank  can  charge  them  back,  and  if  by  so  doing  the  account 
is  insufficient  to  meet  a  check,  the  bank  can  refuse  to  pay. 

When  a  check  is  presented  which  bears  notice  of  any 
irregularity,  the  bank  might  save  itself  from  liability  for 
a  refusal  by  making  a  qualified  refusal,  or  requesting  a 
short  time  to  investigate,  and  thus  prevent  a  loss  in  case 
its  suspicion  should  be  well  founded. 

135.  Lost  Checks. — Usually  when  a  check  is  lost  the 
drawer  stops  payment  of  the  lost  check  and  issues  a  dupli- 
cate, marking  it  "Duplicate."     The  same  rights  and  lia- 
bilities attach  to  the  duplicate  as  existed  in  or  under  the  lost 
check.    If  one  who  endorsed  the  original  also  endorses  the 
duplicate,  he  is  liable  only  to  the  same  extent  as  on  the 
original,  and  time  in  which  presentment  must  be  made  to 
bind  him  is  reckoned  from  the  time  of  the  delivery  of  the 
original. 

136.  Lost  After  Endorsement. — If  a  check  has  been 
lost  after  endorsement  and  comes  into  the  hands  of  a  bona 
fide  holder  to  whom  the  bank  pays,  the  money  cannot  be 


88  SEC.  136a 

recovered  back  from  him ;  and  if  the  bank  has  been  ordered 
to  stop  payment,  such  bona  fide  holder  can  recover  from 
the  maker  and  prior  endorsers.  Where  the  check  has  been 
lost  after  endorsement,  or  is  payable  to  bearer,  the  drawer 
may  demand  a  bond  of  indemnity  before  issuing  a  duplicate, 
as  he  will  be  liable  to  a  bona  fide  holder,  and  the  bank  can 
safely  pay  to  a  bona  fide  holder  when  a  check  has  been 
lost  after  endorsement  in  blank  by  the  payee,  and  pay- 
ment not  stopped. 

I36a.  Where  the  check  is  not  payable  to  bearer,  and  if 
payable  to  order  has  not  been  endorsed,  the  drawer  will  not 
be  liable  on  it.  He  can  stop  payment  at  the  bank  and  should 
immediately  do  so. 

137.  Paid  Checks. — The  bank,  upon  making  payment, 
should  require  a  surrender  of  the  order,  as  a  voucher  of 
payment  to  the  holder.     The  surrendered  checks  should  be 
held  by  the  bank  until  the  customer's  pass-book  is  balanced, 
when  a  return  of  the  check  with  the  balanced  book,  and  an 
acceptance  without  objection  made  by  the  customer,  if  not 
binding  on  him,  is  at  least  good  evidence  toward  proving 
payment  by  the  bank  for  him.     Where  the  check  is  an 
overdraft,  the  bank  should  hold  it  as  evidence  of  the  in- 
debtedness of  the  drawer.     Paid  checks  also  serve  as  evi- 
dence of  payment  by  the  drawer  to  the  payee. 

FORGERY. 

138.  Forged   Signature  of   Drawer. — The   bank   must 
follow  strictly  the  orders  of  the  depositor,  and  where  it 
pays  on  a  forged  or  altered  check  it  cannot  charge  the  cus- 
tomer.    Under  the  Negotiable  Instruments  Law  a  forged 
signature  is  declared  to  be  wholly  inoperative  against  any 
person  whose  name  is  forged,  and  a  material  alteration  vi- 
tiates the  instrument  as  against  any  person  whose  name 
appeared  thereon  when  altered,  except  that  a  bona  fide 


SEC.  139  89 

holder  may  recover  not  to  exceed  the  amount  for  which  the 
instrument  originally  stood.  But  besides  this  enactment,  a 
bank  has  generally  always  been  held  to  a  knowledge  of  its 
customer's  signature.  In  this  most  courts  have  agreed, 
but  the  difficulty  appears  to  be  upon  the  question  of  the 
right  of  the  bank  which  has  paid  to  a  bona  fide  holder  of  a 
forged  instrument  to  recover  back  the  money  from  him. 

139.  The  bank  is  under  no  obligation  to  pay  a  void  order. 
If  it  does,  and  the  question  is  as  to  whether  the  bank  or 
an  innocent  holder  should  suffer,  it  would  seem  that  where 
the  bank  alone  has  been  at  fault,  being  held  to  know  the 
drawer's  signature,  the  money  ought  not  to  be  recovered, 
and  so  the  cases  have  held.     But  if  the  one  who  presents 
the  check  is  at  fault,  as  where  he  ought  to  know,  from  the 
circumstances  under  which  he  took  the  check,  that  it  might 
be  invalid,  and  he  leads  the  bank  into  a  belief  that  the 
check  is  genuine,  the  bank  should  be  allowed  to  recover. 
If  the  drawer  directs  a  bank  to  pay  without  requiring  proper 
identification  or  assuring  itself  of  the  genuineness  of  the 
signature,  the  drawer  must  suffer  the  loss.    See  Sec.  88e. 

140.  Bank  Guarantees  Drawers'  Signature. — In  a  re- 
cent New  York  case,   under  the   Negotiable   Instruments 
Law,  it  has  been  held  that  where  a  bank  pays  a  check  it  guar- 
antees the  signature  of  the  drawer,  and  therefore  cannot 
recover  the  money  paid  on  a  forged  check  to  an  innocent 
holder  in  any  event.     Trust  Co.  v.  Haven,  HI  N.  Y.  S., 
305.     The  earlier  cases  held  that  the  money  could  not  be 
recovered  where  the  party  who  received  the  money  had  not 
been  negligent  and  where  to  make  him  return  it  would  place 
him  in  a  worse  position  than  if  the  payment  had  been  re- 
fused in  the  first  instance,  and  in  some  states  recovery  can 
be  had.    See  Sec.  112. 

141.  Forged    Endorsement. — Where    a    check    validly 
drawn,  but  bearing  a  forged  endorsement  comes  into  the 
hands  of  a  bona  fide  holder  to  whom  the  drawee  bank  pays 


90  SEC.  142 

upon  his  endorsing  the  check,  the  bank  is  not  presumed  to 
know,  and  does  not  guarantee,  the  endorsements,  and  it  can 
recover  the  money  paid  to  the  holder,  but  cannot  charge 
the  depositor.  Jordan  Marsh  Co.  v.  Bank,  87  N.  E.,  740. 
By  endorsing  to  the  bank  the  holder  guarantees  the  prior 
endorsements,  but  does  not  guarantee  the  signature  of  the 
drawer.  This  the  bank  is  presumed  to  know.  Farmers 
&  Merchants  Bank  v.  Bank  of  Rutherford  (Term.),  88 
S.  W.,  939; 

142.  Raised  Checks. — So,  as  the  bank  is  not  presumed 
to  know  and  does  not  guarantee  the  writing  in  the  body  of 
the  check,  it  can  recover  money  paid  on  a  raised  check.    Of 
course,  as  between  the  bank  and  the  depositor,  it  can  charge 
the  depositor  only  the  amount  paid  on  his  valid  orders,  ex- 
cept where  he  by  his  negligence  causes  the  loss,  and  it 
cannot   charge   more   than   the   original   amount   of  the 
check  to  him. 

143.  Wrongful  Payment  an  Acceptance. — It  has  been 
held  that  where  a  bank  pays  a  check  on  a  forged  endorse- 
ment and  charges  the  amount  to  the  drawer  and  settles 
with  him  on  that  basis,  this  is  equivalent  to  an  acceptance 
by  the  bank  and  gives  the  rightful  owner  of  the  check  a 
cause  of  action  against  the  bank  on  the  check.    Other  cases 
have  denied  the  right  against  the  bank  on  the  check  but 
allow  a  recovery  by  the  holder  on  the  ground  that,  having 
charged  the  money  to  the  drawer  and  not  paid  it  to  the 
right  party,  the  bank  holds  money  which  in  equity  and  good 
faith  it  ought  to  pay  to  the  holder.     In  still  other  cases  the 
holder  is  given  no  right  against  the  bank  unless  a  check 
has  actually  been  accepted,  and  he  must  recover  from  the 
maker,  the  maker  having  the  right  to  go  against  the  bank 
for  wrongfully  paying  on  a  forged  endorsement. 

144.  Depositor  Not  Bound  to  Know  Signature  of  En- 
dorser.— A  depositor  is  not  presumed  to  know  the  sig- 


SEC.  145  91 

natures  of  payees  of  checks  and  is  not  bound  to  examine 
endorsements  on  returned  checks. 

145.  Adoption  of  Forged  Signature. — If  A  himself  is- 
sues an  instrument  on  which  his  signature  has  been  forged, 
he  is  liable  on  it.     Anyone  who  holds  out  a  signature  as  his 
own  will  be  bound  thereby  to  any  bona  fide  holder.     Where 
a  forged  check  has  already  been  paid  by  the  bank  and  the 
bank  asks  the  customer  whether  it  is  genuine,  the  customer 
is  not  estopped,  if  he  acknowledges  the  signature,  to  after- 
wards deny  it  if  he  discovers  it  to  be  a  forgery.     The  bank 
has  not  been  led  into  paying  the  check  on  his  statement. 
But  where  the  bank  states  its  suspicions  and  that  it  cannot 
save  itself  unless  it  acts  promptly,  the  customer  should 
make  a  very  careful  examination  before  admitting  the  sig- 
nature, or  he  will  be  bound. 

146.  Diligence  in  Discovering. — We  have  already  dis- 
cussed the  matter  of  diligence  which  a  depositor  must  ex- 
ercise upon  a  return  of  paid  checks  by  the  bank.    What  is 
negligence  in  delaying  to  discover  a  forgery  depends  upon 
the  facts  and  circumstances  in  each  particular  case.     Some- 
times a  day's  delay  might  be  negligence,  while  in  other 
cases  six  months  might  be  justified.     See  Sec.  43*88^ 

The  government  is  held  to  the  same  degree  of  diligence  in 
discovering  forgeries  and  giving  notice  thereof  as  is  an  in- 
dividual. U.  S.  v.  Bank,  28  Fed.,  357. 

A  few  cases  are  here  given  of  the  numerous  complica- 
tions brought  about  by  the  rascality  of  forgers  and  crim- 
inals. 

a.  A  made  an  arrangement  with  a  bank  whereby  the 
bank  was  to  cash  checks  drawn  by  A's  agent.  From  time 
to  time  the  bank  was  to  draw  on  A  for  the  amount  of 
checks  cashed,  forwarding  the  paid  checks  with  the  draft. 
The  checks  were  supposed  to  be  given  by  the  agent  for  corn 
purchased  for  A.  The  agent,  instead  of  issuing  checks  for 
corn,  issued  checks  in  the  names  of  different  persons  and 


92  SEC.  b 

then  himself  endorsed  these  names  on  the  checks,  and  also 
his  own  name,  and  had  the  bank  cash  them.  The  court  held 
that  A  could  not  recover  the  money  which  he  had  paid  on 
the  bank's  drafts,  as  the  bank  was  not  negligent  in  receiv- 
ing and  paying  such  checks  of  the  agent  so  long  as  A,  upon 
receiving  the  paid  checks,  did  not  discover  and  notify  the 
bank  of  the  fraud.  Armour  v.  Greene  County  State  Bank, 
112  Fed.,  631. 

b.  A  was  bookkeeper  for  X.     Having  made  up  and  pro- 
cured X's  signature  to  pay  roll  checks,  A  raised  and  cashed 
them,  keeping  the  amount  in  excess  of  what  they  were 
signed  for.     When  the  checks  were  returned  as  vouchers 
A  reduced  the  amounts  in  them  to  correspond  with  the 
amount  for  which  they  were  originally  drawn  and  also  re- 
duced the  amounts  in  the  bank's  statement  to  correspond 
with  the  amounts  shown  by  the  checks.     A  then  notified 
his  employer,  X,  that  the  statement  of  the  bank  and  paid 
checks  as  reported  were  correct.     X  had  the  accounts  of  A 
audited  monthly.     The  court  held  in  this  case  that  A  was 
not  negligent  in  leaving  the  examination  of  the  accounts  to 
the  auditor  and  that  the  auditor's  failure  to  examine  the 
statements  was  not  negligence.    Under  all  the  circumstances 
X  was  diligent.  Clark  v.  National  Shoe  and  Leather  Bank, 
52  N.  Y.  S.,  1064. 

c.  Where   A   presents   to   the   X   bank   a   check   drawn 
on  Y  bank  and  the  X  bank  pays  it  to  A,  without  inquiry  or 
identification  of  A,  the  X  bank  then  endorses  it  and  collects 
the  money  from  the  Y  bank,  the  Y  bank  relying  on  the  en- 
dorsement of  the  X  bank  and  therefore  not  making  a  rigid 
examination  of  the  signature,  and  subsequently  the  Y  bank 
learns  that  the  check  was  a  forgery,  the  Y  bank  upon 
promptly  notifying  the  X  bank  can   recover  the  money. 
Having  already  paid  the  check  to  A,  the  X  bank  is  in  no 
worse  position  than  it  would  have  been  if  the  Y  bank  had 
refused  payment  upon  presentation.     While  it  might  have 


SEC.  d  93 

been  better  able  to  recover  from  A,  it  had  parted  with  the 
money  before  it  asked  payment  of  the  Y  bank  and  besides, 
by  its  endorsement  it  would,  under  the  Negotiable  Instru- 
ments Law,  be  liable. 

d.  A  had  an  account  in  bank  B  in  the  name  of  "A,  Execu- 
tor," but  no  individual  account.     X  forged  A's  individual 
signature  to  a  check,  which  was  paid  by  the  bank  and  the 
check  charged  to  the  account  of  "A,  Executor."    By  reason 
of  this  mistake  it  was  three  months  before  A  was  made 
aware  of  the  forgery  and  the  bank  notified.     The  court  held 
that  it  was  the  bank's  negligence,  and  not  A's.     Bank  v, 
Bank,  58  Ohio  S.,  207. 

e.  H,  under  the  name  D,  secured  a  loan  from  X,  giving 
a  note  and  mortgage  in  the  name  of  D,  representing  that  he 
was  D  and  that  he  owned  the  land  standing  in  D's  name. 
The  loan  was  made  and  a  check  given  payable  to  D,  drawn 
on  the  Y  bank.     H  endorsed  the  check  in  the  name    of  D 
and  again  as  H.     The  court  held  that  H  was  the  intended 
payee,  and  not  D ;  that  as  between  the  bank  and  H,  H  was 
entitled  to  payment,  and  the  bank,  having  no  notice  of  the 
fraud,  was  not  liable  to  X  for  the  amount  of  the  check. 
Meyer  et  al  v.  Indiana  National  Bank,  61  N.  E.,  596.     In 
this  case,  while  H  represented  that  he  was  D,  it  was  the 
person  of  H  to  whom  X  intended  to  make  the  loan.    While 
it  is  true  that  it  was  made  in  the  name  of  D,  it  was  a  ques- 
tion of  identity  of  the  person,  and  while  H   forged  the 
mortgage  and  the  note,  the  check  on  which  he  obtained  the 
money  was  intended   for  H,  though  in  the  name  of  D. 
Where  the  loss  lies  between  the  bank,  who  paid  to  the  iden- 
tical person  to  whom  X  made  the  loan,  and  X,  who  should 
have  been  primarily  held  to  ascertain  the  identity  of  H,  it 
seems  proper  that  X  should  lose.    The  check  was  intended 
for  the  person — not  the  name.     Canadian  Bank  of  Com- 
merce v.  Bingham  (Washington  State),  71  Pac.,  43. 

f.  In  Rhode  Island,  where  the  Negotiable  Instruments 


94  SEC.  g 

Law  is  in  force,  it  has  been  held  that  a  signature  made 
under  circumstances  similar  to  those  stated  in  the  preceding 
paragraph  was  a  signature  made  without  authority,  and 
therefore  "wholly  inoperative,"  under  the  law.  Tolman  v. 
American  National  Bank,  22  R.  L,  462. 

g.  But  where  the  check  is  delivered  to  the  person  in- 
tended, though  under  a  different  name,  and  he  forges  the 
name  and  transfers  it  to  a  bona  fide  holder,  the  bank  would 
not  be  liable,  as  the  mistake  should  be  laid  to  the  drawer. 

Attention  is  called  to  the  holdings  in  the  states  where 
the  Negotiable  Instruments  Law  is  in  force,  as  the  decisions 
under  this  law  in  one  state  are  likely  to  be  followed  in  other 
states  (though  not  necessarily  so)  to  bring  about  the  uni- 
formity which  the  Negotiable  Instruments  Law  was  meant 
to  effect. 


SEC.  147  95 


CHAPTER  VIII. 

RIGHTS  OF  THIRD  PARTIES  AND  INCIDENTS 
OF  DEPOSITS. 

147.  Attachment  and  Garnishment. — When  B  owes  A 
a  debt,  if  A  sues  and  gets  judgment  against  B,  B's  prop- 
erty is  subject  to  attachment  for  payment  of  the  judg- 
ment. In  some  states  an  attachment  may  be  had  in  any 
case  before  judgment;  and  in  most  states  it  can  be  had 
before  judgment  against  the  property  of  one  who  is  not 
a  resident  of  the  state,  or  who  is  about  to  take  his  goods 
out  of  the  state,  or  leave  the  state,  to  defraud  creditors. 
By  attachment  the  property  is  usually  placed  in  pos- 
session or  under  control  of  the  sheriff,  marshal  or  other 
officer,  until  the  judgment  is  rendered,  when  the  property 
is  sold  and  judgment  paid  out  of  the  proceeds,  and  in 
case  of  money,  out  of  the  fund  attached,  unless  judgment 
is  for  the  defendant,  B. 

Now,  if  Bank  C  owes  B,  or  has  property  belonging  to 
B,  A  can  attach  this  debt  or  property  in  C's  hands.  This 
attachment  of  property  in  possession  of  a  third  party  is 
called  garnishment.  The  bank  would  be  the  garnishee. 
If  B  has  a  deposit  in  bank  C,  which  is  actually  B's,  or  for 
which  the  bank  is  indebted  to  B,  A  can  have  the  deposit 
attached,  whether  it  be  a  credit  balance,  special  deposit, 
or  money  on  general  deposit  which  B  has  borrowed,  so 
long  as  it  is  B's  money  as  between  B  and  the  bank.  If 
it  is  B's  money,  though  standing  in  the  name  of  X,  it  can 
be  attached  for  B's  debt,  if  A  can  prove  that  it  is  really 
B's.  Des  Moines  Cotton  Mills  Co.  v.  Cooper,  93  Iowa, 
654.  The  bank  must  hold  all  funds  actually  belonging 


96  SEC.  148 

to  B,  even  though  they  may  stand  in  another's  name  at 
the  time  service  of  the  attachment  is  made,  and  in  some 
states  any  subsequently  received,  until  the  attachment  is 
discharged.  It  must  not  pay  any  checks  after  service  of 
the  attachment,  even  though  the  checks  were  drawn  be- 
fore service  (Banking  Co.  v.  So.  Pac.  Co.  [Cal.],  71  Pac., 
93),  except  in  those  states  where  the  drawing  of  a  check 
is  an  assignment  of  the  money  to  the  payee  of  the  check. 

148.  Where  Check  Certified.— Where  the  bank  has  cer- 
tified a  check  before  the  attachment,  which  check  has 
been  delivered  to  the  holder,  as  the  amount  of  the  cer- 
tified check  has  been  set  aside,  the  bank  now  being  debtor 
to  the  holder  of  the  check,  this  amount  can  not  be  at- 
tached.    Of  course,  the  one  who  attaches  secures  a  lien 
only   on   that   which   the   depositor   himself   could   have 
taken;  and  where  B  deposits  in  his  name  money  belong- 
ing really  to  X,  the  money  cannot  be  attached  as  B's.  The 
question  is,  is  it  B's  property?    If  so,  it  can  be  attached 
for  B's  debt.    If  X's  it  can  be  attached  as  X's. 

149.  Items  for  Collection. — If  A  deposits  items  for  col- 
lection, the  amount  represented  by  such  items  can  not  be 
attached  until  they  are  collected — until  A  would  have  an 
absolute  right  against  the  bank  for  the  amount.     The 
fact  that  he  may  have  the  privilege  of  drawing  checks 
against  credit  given  would  not  give  him  an  absolute  right 
to  do  it. 

150.  Money  Assigned. — We  have  noted  that  a  check  is 
not  an  assignment  of  the  fund.    It  is  merely  an  order  to 
the  bank  to  pay,  and  until  paid  the  money  does  not  be- 
come the  property  of  the  payee  of  the  check.     But  the 
depositor  can  part  with  his  interest  in  the  fund  by  trans- 
ferring it  by  an  assignment  instead  of  by  check.     And 
where  he  does  so,  the  assignee  having  the  superior  equity 
in  the  fund,  it  can  not  be  attached  as  property  of  the  as- 
signor, the  depositor. 


SEC.  151  97 

It  should  also  be  noted  here  that  in  some  states,  even 
where  a  check  for  a  part  of  a  deposit  has  not  been  re- 
garded as  an  assignment,  a  check  for  the  entire  balance 
has  been  regarded  as  an  assignment.  The  reason  for  the 
distinction  is  not  very  satisfactory,  but  as  the  Negotiable 
Instruments  Law  provides  that  a  check  shall  not  operate 
as  an  assignment  of  "any  part"  of  the  fund,  it  is  probable 
that  the  courts  in  those  states  where  the  distinction  was 
formerly  made  will  wipe  out  the  distinction,  even  though 
to  some  the  words  "any  part"  may  seem  ambiguous.  The 
act  having  been  passed  to  bring  about  a  uniformity  in 
the  law,  this  end  will  be  facilitated  by  holding  that  no 
check  is  an  assignment. 

151.  Particular  Fund. — It  has  been  held  that  where  a 
check  is  drawn  against  a  particular  fund,  as  in  payment 
for  wages,  out  of  money  set  apart  for  that  purpose,  the 
check  is  an  assignment,  and  the  holder  is  entitled  to  take 
the   money  rather  than  an  assignee  for  the  benefit  of 
creditors.     This  works  no  hardship  on  anyone,  as  the 
wage-earners  are  usually  entitled  to  preference  over  other 
creditors,  and  an  order  drawn  against  a  particular  fund 
is  not  a  negotiable  check.     Neg.  Ins.  Law. 

152.  Presumed  to  Belong  to  One  in  Whose  Name  De- 
posited.— If  a  deposit  stands  in  the  name  of  A,  and  the 
bank  has  no  notice  that  it  is  not  A's,  the  bank  cannot  be 
held  liable  for  paying  the  money  on  attachment  for  A's 
debt. 

153.  Property  in  Bank  Subject  to. — Property  of  a  na- 
tional bank,  and  in  some  states  that  of  a  state  bank,  can- 
not be  attached  for  a  debt  of  the  bank,  no  matter  in 
whose  hands.     Pacific  Nat'l  Bank  v.  Mixter,  124  U.  $., 
721 ;  Van  Reed  v.  Bank,  198  U.  S.,  554,  and  a  state  court 
cannot  issue  an  injunction  against  a  national  bank  before 
final  judgment.    Nat'l  Bank  v  Mixter.     But  the  property 
which  the  bank  holds,  belonging  to  another   (not  such 


98  SEC.  154 

bank  or  national  bank)  can  be  attached  in  the  hands  of 
the  bank  for  the  debt  of  the  depositor  or  creditor  of  the 
bank.  Earle  v.  Pennsylvania,  178  U.  S.,  449,  and  see 
page  456. 

154.  Is  a  Check  Payment. — If  A  owes  B  and  gives  B 
a  check  for  the  amount  of  the  debt,  this  is  not  a  payment 
of  the  debt  until  the  check  is  paidT  i.  e.,  the  original  debt 
can  be  sued  on  if  the  check  for  any  reason  is  not  paid, 
unless  it  is  the  intention  of  the  parties  that  the  debt 
should  be  extinguished  by  the  check.     Of  course,  if  the 
one  who  receives  the  check  is  negligent  in  presenting  it 
for  payment,  the  loss  is  his.    See  Sec.  89.    And  it  is  pay- 
ment if  taken  for  a  debt  by  the  bank  on  which  drawn. 

But,  while  a  check  is  not  an  assignment,  and  even 
though  the  check  is  not  an  absolute  payment  of  the  debt 
to  B  until  the  check  is  paid,  when  A  delivers  to  B  a  check 
for  his  debt,  it  is  so  far  considered  payment  that  A  can 
not  be  garnished  by  creditors  of  B. 

155.  Statutes  of  Limitations. — Where   A   owes   B,   B 
should  be  diligent  in  enforcing  his  rights  against  A.     If 
he  let  the  debt  run  on  for  years,  both  B  and  A  may  forget 
the  circumstances  connected  with  the  incurring  of  the 
debt.    If  either  should  die  after  the  debt  has  been  due  for 
some  years  it  would  be  difficult  for  the  estate  to  prove  or 
disprove,  respectively,  the  debt.    For  this  reason  statutes 
are  enacted  to  prevent  litigation  founded  on  claims  so  old 
that  there  might  be  questions  as  to  their  origin  or  validity 
and  difficulty  in  establishing  just  claims  where  they  ex- 
ist.    These  statutes  are  termed  Statutes  of  Limitations. 
They  generally  provide  that  after  a  certain  time  subse- 
quent to  the  date  on  which  the  right  accrues,  no  suit  can 
be  brought.    The  creditor  still  has  his  right  against  the 
debtor,  but  the  law  will  not  allow  him  to  enforce  the 
right.    His  remedy  is  gone.    This  is  the  substance  of  the 
statutes,  though  in  some  states  it  has  been  held  that  the 


SEC.  156  99 

right  itself  is  barred.  We  need  not  discuss  here  the  effect 
of  a  statute  which  bars  the  right  as  well  as  the  remedy  for 
enforcing  that  right.  When  the  creditor  has  the  right  to 
sue,  from  that  date  the  time  is  reckoned;  then  the  Stat- 
ute of  Limitations  commences  to  run. 

156.  Demand  Must  be  Made  Before  Statute  Will  Run. 
— As  the  contract  by  the  bank  is  that  it  will  pay  on  de- 
mand, it  is  generally  held  that  a  demand  upon  the  bank, 
for  payment,   is  necessary  before   suit  can  be  brought 
against  the  bank.    And  until  a  demand  is  made  the  Stat- 
ute of  Limitations  does  not  begin  to  run.    In  some  states 
it  is  held,  however,  that  where  a  statement  of  account  is 
rendered  by  the  bank  (and  return  of  pass  book  balanced 
is  regarded  as  such  statement)  the  depositor  has  a  right 
against  the  bank  from  that  date  for  that  amount,  and 
that  at  that  time  the  statute  begins  to  run.     As  the  de- 
positor has  not  demanded  payment  by  leaving  his  book 
for  balance,  and  as  the  money  is  not  due  until  a  demand 
of  payment,  no  action  could  be  brought  before  demand 
against  the  bank,  and  the  statute  ought  not  to  be  held  to 
run  until  there  has  been  a  demand.    The  return  of  pass 
books  balanced  is  in  no  sense  a  refusal  by  the  bank  to 
pay  the  balance ;  and  the  courts  in  the  majority  of  states 
hold  that  there  must  be  a  demand  upon  and  refusal  by 
the  bank  before  the  statute  commences  to  run.     When 
the  depositor  does  not  object  to  the  amount  as  shown 
by  his  pass  book  when  balanced,  of  course,  it  would  be 
reasonable  to  hold  that  he  could  not  bring  suit  for  the 
difference  between  that  amount  and  what  he  claims  it 
should  be  after  several  years,  where  he  has  been  negligent. 

157.  No    Demand   Necessary   Where   Bank    Commits 
Wrong. — Of  course,  if  the  bank  commits  a  wrong  it  is 
liable  to  suit  as  soon  as  the  wrong  is  perpetrated,  and  the 
statute  begins  to  run  at  once,  without  demand.    Having 
done  a  wrong,  the  bank  has  waived  the  demand.    If  the 


100  SEC.  158 

bank  notifies  the  depositor  that  it  claims  the  money,  or 
that  it  will  not  pay  his  checks,  or  if  it  fails,  no  demand  is 
necessary.  Otherwise  demand  should  always  be  made 
upon  a  bank  before  suit  is  brought  for  recovery  of  a  de- 
posit. 

158.  Against  Drawer  of  Check. — Where  a  drawer  has 
no  .funds  in  bank  and  gives  a  check,  he  commits  a  wrong, 
and  no  demand  need  be  made  on  him  before  the  right  to 
bring  an  action   accrues,   and   therefore   the   Statute  of 
Limitations  commences  to  run  as  against  him  as  of  the 
time  payment  is  refused.    See  Sec.  194. 

159.  Where  Bank  Refuses  Payment. — The  right  to  sue 
a  bank  for  dishonoring  a  check  accrues  as  soon  as  the 
refusal  has  been  made  upon  demand  or  presentation  of  a 
proper  order,  and  the  statute  commences  to  run  from 
the  date  of  the  refusal. 

As  against  Certificates  of  Deposit,  see  Sec.  49;  certi- 
fied check,  128. 

160.  Payment  by  Mail. — If  A  requests  the  bank  to  send 
him  a  check,  currency,  exchange,  etc.,  by  mail,  A  makes 
the  mail  his  agent,  and  if  the  bank  sends  it  in  the  man- 
ner requested,  the  bank  will  be  discharged  as  soon  as  the 
item  is  deposited  in  the  mail  addressed  aa  A  directed.   So 
if  A  requests  that  it  be  sent  by  express,  or  in  any  other 
manner,  strict  compliance   with   directions   releases  the 
bank  as  soon  as  the  item  is  delivered  to  the  carrier  desig- 
nated or  his  agent.     The  bank's  duty  is  to  pay  the  de- 
positor at  the  bank.     If  the  depositor  asks  for  transmis- 
sion of  money  without  naming  the  carrier  to  be  used, 
any  safe  method  used  by  the  bank  will  discharge  it  from 
further  liability.    Currency,  paper  negotiable  by  delivery, 
or  coin  should  be  registered  or  sent  by  express.     The 
bank  must  always  exercise  care  in  receiving  or  paying 
deposits. 

161.  Deposit  Made  by  Mail. — When  a  deposit  is  mailed 


SEC.  162  101 

to  the  bank  the  depositor  makes  the  mail  his  agent.  The 
bank  is  in  no  case  liable  until  the  money  is  delivered  to 
the  officer  of  the  bank,  and  a  deposit  dates  from  the  re- 
ceipt of  the  money. 

162.  Check. — If  A  mails  a  check  to  B,  the  title  remains 
in  A  until  the  check  has  been  delivered  to  B,  unless  B 
has  requested  it  sent  by  mail,  in  which  case  B  makes  the 
mail  his  agent  and  delivery  to  the  mail  is  delivery  to  B. 
As  the  debtor  must  seek  the  creditor,  unless  the  creditor 
has  designated  an  agent  to  act  in  accepting  payment, 
payment  is  not  made  until  there  is  a  delivery  to  B  him- 
self.    Garthwaite  v.  Bank  of  Tulare,  134  Cal.,  237.     See 
Sec.  64. 

163.  Interest  on  Deposits. — Unless  there  is  a  contract 
for  the  payment  of  interest,  a  depositor  is  not  entitled  to 
interest.    When  demand  is  made  for  a  deposit,  however, 
the  money  immediately  becomes  due  and  if  the  bank  fails 
to  pay,  it  is  liable  for  interest  at  the  legal  rate.   Lowndes 
v.  City  Nat.  Bk.,  72  Atlantic  Rep.,  150.     When  a  bank 
fails,  the  suspension  renders  it  impossible  to  perform  its 
duty  to  pay  if  demand  is  thereafter  made,  and  no  demand 
need  be  made.     The  suspension  is  equivalent  to  a  de- 
mand and  refusal  to  pay  and  the  depositor  is  entitled  to 
interest  from  the  date  of  failure.     Nat'l  Bank  of  Com- 
monwealth v.  Nat'l  Bank,  94  U.  S.,  437.    If  the  bank  re- 
sumes business  he  is  entitled  to  interest  at  the  legal  rate. 
However,  depositors  are  usually  anxious  to  assist  the  bank 
and  its  officers  in  putting  the  bank  on  its  feet  again  and 
they  will  generally  waive  their  right  to  interest  under  the 
circumstances.    If  the  bank  does  not  resume,  interest  is 
usually  paid  creditors  from  the  date  of  the  failure  until 
final  payment,  if  the  estate  is  sufficient,  but  otherwise  a 
claim  is  entitled  to  no  interest  as  against  the  receiver, 
unless  it  would  be  entitled  to  it  as  against  the  bank  at 
date  of  failure. 


102  SEC.  164 

164.  Where  a  bank  wrongfully  pays  out  the  money  of 
a  depositor,  he  is  entitled  to  interest,  even  though  he 
would  have  let  the  money  remain  in  the  bank  and  was 
not  being  allowed  interest.     Savings  Bank  v.  Nat'l  Bank 
(Iowa),  70  N.  W.,  769.    Where  he  is  drawing  interest  at 
a  less  rate,  but  is  at  liberty  to  withdraw  at  any  time, 
refusal  to  pay  gives  him  the  right  to  interest  at  the  legal 
rate  from  the  date  of  the  demand  and  refusal  or  the 
wrongful  payment.     As  to  interest  on  certificates  of  de- 
posit, see  Sec.  49. 

165.  Lien. — In  most  states  when  a  debt  of  the  depos- 
itor to  the  bank  matures,  any  securities  which  the  bank 
holds  for  the  depositor,  in  the  regular  course  of  business, 
may  be  held  until  payment  of  the  debt.     The  right  to 
hold  the  property  to  secure  the  debt  is  called  a  banker's 
lien. 

166.  If  a  bank  holds  negotiable  paper  for  collection  for 
the  depositor,  or  the  proceeds  of  collections,  although  re- 
ceived by  the  bank  before  the  debt  to  it  became  due,  the 
banker's  lien  attaches  when  the  debt  is  due,  but  not  be- 
fore.   Nat.  Bank  of  Phoenixville  v.  Bonsor,  38  Pa.  Super. 
Ct,  275. 

167.  Collateral  and  Special  Deposit. — Where  security 
is  given  to  a  bank  under  an  express  agreement  that  it  is 
collateral  to  a  specific  indebtedness,  then  no  part  of  that 
security,  or  the  proceeds  thereof,  can  be  applied  except 
in  payment  of  the  debt  expressly  secured.    A  special  de- 
posit or  a  deposit  of  money  or  property  made  for  any 
specific  purpose  cannot  be  diverted  from  that  purpose 
and  applied  by  virtue  of  such  lien  or  right  of  set  off. 
Under  such  circumstances  no  lien  arises  except  such  as 
is   expressly  contracted   for.     Furber  v.   Dane    (Mass.), 
89  N.  E.,  227;  Van  Zandt  v.  Hanover  Nat'l  Bank,  149 
Fed.,  127.     Affirmed  in  U.  S.  Supreme  Ct.,  not  yet  re- 
ported. 


SEC.  168  103 

1 68.  Notes  Presented  for  Discount. — Where  a  deposi- 
tor is  indebted  to  the  bank  and  he  presents  notes  for  dis- 
count, the  bank  cannot  discount  the  notes  and  imme- 
diately use  the  proceeds  of  the  discount  to  extinguish 
other  debts  past  due;  but  when  the  notes  so  discounted 
fall  due  the  lien  of  the  bank  attaches  as  to  his  general 
deposit  or  securities  held  by  the  bank  which  it  obtained 
in  the  regular  course  of  business.     And  where  notes  are 
sent  to  a  bank  for  discount,  and  the  bank  refuses  to  dis- 
count them,  it  must  return  them  to  the  sender,  and  can- 
not acquire  a  lien  in  this  way.     Hanover  Natl.  Bank  v. 
Van  Zandt,  —  U.  S., . 

169.  Set  Off. — Akin  to  the  banker's  lien  is  the  right  of 
set  off.     If  A  owes  B,  and  B  owes  A,  an  action  by  A 
against  B,  at  law,  formerly  would  give  B  no  right  to  set 
up  A's  debt  to  him  as  a  defense.     His  only  remedy  was 
to  also  sue  A.    Thus  there  would  be  two  actions.   Courts 
of  equity,  however,  afterwards  allowed  what  is  called  a 
set  off,  permitting  the  one  claimant  to  set  off  his  claim 
against  the  claim  of  the  other,  adjusting  the  two  claims 
in  one  suit,  to  prevent  a  useless  multiplicity  of  suits.    So 
where  A  owes  the  bank  and  the  bank  owes  A,  in  the  reg- 
ular course  of  business,  the  bank  can  offset  what  it  owes 
A  against  his  debt  to  the  bank. 

170.  When  Right  Attaches.— The  fact  that  the  debt  is 
due  gives   the  bank  the  right  to  the   lien,   regardless   of 
whether  the  bank  has  actually  made  the  application  and, 
therefore,  a  check  presented  after  the  lien  has  attached 
will  not  have  any  rights  prior  to  the  right  of  the  bank, 
even  though  the  application  has  not  been  made  and  the 
bank's  books  show  a  balance  due  the  depositor.     The 
question  is  whether  the  lien  has  attached,  not  whether 
the  money  has  been  applied  by  the  bank.    In  a  few  States 
there  is  no  lien  without  an  express  contract  to  that  ef- 
fect, and  in  some  States  the  bank  must  notify  the  de- 


104  SEC.  171 

positor  before  it  will  have  a  prior  right  to  apply  the  de- 
positor's property  on  his  debt. 

171.  What  May  Be  Subject  of. — Property  belonging  to 
two  persons  jointly  cannot,  as  a  rule,  be  applied  on  the 
indebtedness  of  one  of  them,  or  vice  versa.     The  debtor 
on  the  obligation   must  be   identical,  in  law,  with   the 
creditor  to  whom  the  property  or  deposit  in  the  hands 
of  the  bank  actually  belongs. 

A  deposit  by  an  agent,  of  his  principal's  money,  does 
not  give  the  bank  a  right  to  set  off  the  deposit  against  a 
debt  of  the  agent.  Shawnee  Natl.  Bank  v.  Wootten 
&  Potts,  103  Pac.,  714. 

I7ia.  A  deposit  of  a  partnership  could  not  be  offset 
against  a  debt  of  an  individual  member  of  the  partner- 
ship to  the  bank,  and  vice  versa.  Scammon  v.  Kimball, 
92  U.  S.,  362.  A  debt  of  A  cannot  be  offset  against  a  de- 
posit of  A  as  executor  or  trustee  of  B.  In  re  Hauenstein, 
101  N.  Y.  S.,  917.  The  property  of  one  person  cannot  be 
offset  against  the  debt  of  another.  Mingus  v.  Bank  of 
Ethel,  117  S.  W.,  683  (Mo.)  We  have  considered  who  is 
the  real  owner  of  a  deposit.  See  Sec.  39.  But  where  a 
bank  receives  the  money  not  knowing  that  it  is  not  the 
depositor's,  applies  it  on  his  note  and  surrenders  the  note, 
the  true  owner  of  the  money  cannot  follow  it  into  the 
hands  of  the  bank.  78  N.  W.,  238  (Iowa). 

I7ib.  Statutes. — In  most  states  the  right  of  set  off  is 
regulated  by  statute.  The  right  to  set  off  depends  upon 
the  law  of  the  state  where  the  deposit  or  property  is 
held  by  the  bank,  that  being  the  place  where  the  bank 
would  have  to  be  sued,  and  the  right  depends  upon  the 
law  of  the  place  where  suit  would  have  to  be  brought  to 
determine  the  controversy. 

172.  In  Case  of  Insolvency  of  Depositor. — Generally 
when  a  depositor  becomes  insolvent  the  bank  may  make 
the  application  of  his  deposit  against  any  debt  due  to 


SEC.  173  105 

the  bank.  In  some  states  the  bank  can  set  off  the  deposit 
though  the  note  is  not  yet  due.  Assignee  v.  Bank  (Ky.), 
13  S.  W.,  910.  In  others  the  debt  must  be  due.  Bank  v. 
Bank,  56  Nebraska,  803.  If  a  depositor  becomes  in- 
solvent and  his  estate  is  adjusted  under  the  bankruptcy 
laws  of  the  United  States,  "In  all  cases  of  mutual  debts 
or  mutual  credits  between  the  estate  of  a  bankrupt  and  a 
cheditor  the  account  shall  be  stated  and  one  debt  shall 
be  set  off  against  the  other,  and  the  balance  only  shall 
be  allowed  or  paid."  Tomlinson  v.  Bank  of  Lexington,  145 
Fed.,  824;  N.  Y.  Co.  Bank  v.  Massey,  192  U.  S.,  138.  It 
must  be  an  indebtedness  that  is  due  at  the  time  of  the 
filing  of  the  petition  in  bankruptcy. 

173.  Instrument    Payable   at    Bank.— The    Negotiable 
Instruments  Law  provides  that  where  an  instrument  is 
"payable  at  a  bank  it  is  equivalent  to  an  order  to  the 
bank  to  pay  the  same  for  the  account  of  the  principal 
debtor  thereon."    Except  in  one  or  two  states,  the  bank 
is  under  no  obligation  to  use  a  deposit  which  is  smaller 
than  the  amount  of  the  note. 

I73a.  And  the  better  rule  is  that  the  bank  cannot 
make  the  application  before  the  paper  is  due,  without  the 
depositor's  consent.  When  due  the  application  should 
be  made. 

174.  Insolvency  of  Bank — National. — When  a  national 
bank  fails,  the  deposit  balance  of  a  depositor  can  be  off- 
set against  any  debt  of  the  depositor,  whether  due  or  not. 
Scott  v.  Armstrong,  146  U.  S.,  499.    This,  in  effect,  gives 
the  debtor  to  the  bank  a  preference.    In  some  states  this 
rule  is  followed.     In  others  the  debt  must  be  due.     But 
the  claim  against  the  bank  must  be  held  at  time  of  fail- 
ure.   If  acquired  subsequently  it  cannot  be  offset. 

175.  Preference  in  Bankruptcy. — Where   one   who  is 
insolvent  deposits  money  in  bank  within  four  months 


106  SEC.  176 

prior  to  his  bankruptcy,  and  the  money  is  subject  to 
check,  this  does  not  constitute  a  preference,  although  the 
bank  may  be  a  creditor  and  have  the  right,  under  Sec- 
tion 68a  of  Bankruptcy  Act  of  July  I,  1898,  to  set  off  the 
bank's  claim  against  the  balance  of  the  deposit.  But 
where  the  bank  holds  a  claim  against  an  insolvent,  which 
it  has  acquired  from  some  one  else,  and  the  insolvent 
pays  the  claim  to  the  bank,  this  is  a  payment  which  con- 
stitutes  a  preference  under  the  said  act,  and  the  bank 
must  surrender  the  preference  before  it  can  prove  any 
Geo.  M.  Hill  Co.,  130  Fed.,  315;  In  re  W.  W.  Mills  Co., 
162  Fed.,  42. 

176.  Right   to    Set-off    May   Be   Waived.— When   the 
right  to  set-off  exists  it  must  be  demanded  at  time  of  pay- 
ment of  counterclaim,  otherwise   the   right  is   lost  and 
the  money  paid  cannot  be  recovered. 

177.  Death  of  Depositor. — Upon  the  death   of  a  de- 
positor, or  any  other  person  to  whom  the  bank  is  in  any 
way  indebted,  no  payment  should  be  made  except  to  a 
duly   appointed   administrator   or   executor.      Death    re- 
vokes all  checks,  in  most  states,  and  the  bank  should 
certainly  not  pay  any  checks  after  it  has  notice  of  the 
death.     See  Sec.  101.     Any  bona  fide  holder  of  a  check 
will  have  a  claim  against  the  estate.     If  the  estate   is 
solvent  he  will  get  his  money,  but  if  the  estate  should 
be  insolvent  he  is  entitled  to  receive  only  his  pro  rata 
share  of  the  estate,  along  with  other  creditors,  and  a 
payment  by  the  bank  after  the  death  of  the  depositor 
would  give  the  party  who  received  payment  a  preference 
over  other  creditors.     The  balance   of  the   deposit   be- 
comes  the   property   of  the   estate.      In   some   states   a 
specified   time   after   death   of   depositor   is   allowed,   in 
which  checks  may  be  presented  and  paid  at  the  bank. 

178.  Upon  the  death  of  a  depositor,  his  executor  or 


SEC.  179  107 

administrator  is  alone  entitled  to  withdraw  any  balance 
to  the  depositor's  credit.  Sometimes,  when  the  estate 
is  very  small  and  the  money  in  bank  is  practically  the 
only  asset  not  in  possession  of  the  next  of  kin,  the  bank 
may  safely  pay  the  money  to  the  undertaker  who  buries 
the  deceased,  where  the  state  statute  gives  the  under- 
taker priority  of  payment  over  all  other  creditors.  If 
there  is  more  than  sufficient  for  this  purpose,  other  prior 
claims  might  be  paid ;  but  when  any  such  further  pay- 
ments are  made  by  the  bank  they  are  made  at  the  bank's 
peril. 

179.  It  is  safest  to  pay  money  of  a  deceased  depositor 
only  to  the  executor  or  administrator;  that  of  an  insane 
person,  to  the  guardian  or  committee ;  that  of  an  infant, 
only  to  the  guardian,  except  in  some  cases  where  the 
infant  has   himself  deposited   the   money   in   a   savings 
account    (see    Sec.    59)  ;   and    that    of    an    insolvent    or 
bankrupt  depositor,  only  to  the  receiver  or  trustee   in 
bankruptcy.      These    representatives    of    the    respective 
estates  are  appointed  by  the  court,  and  when  vested  by 
the  court  of  your  own  state,  territory  or  district  with 
jurisdiction,  your  bank  will  have  to  pay  to  such  repre- 
sentative when  proper  demand  is  made  by  him.     It  is 
usual  for  the  representative  to  file  with  the  bank  a  copy 
of  his  appointment,  certified  by  the  clerk  of  the  court; 
but  if  no  copy  is  filed,  the  original  should  be  exhibited 
and  the  bank  made  sure  of  his  authority.     See  Sec.  36. 

1 80.  Local  Court  Should  Appoint  Legal  Representa- 
tive.— The  representatives  named  usually  have  no  power 
to  act  beyond  the  limits  of  the  jurisdiction  of  the  court 
which  made  the  appointment,  and  the  payment  should 
be  made  only  upon  the  order  of  a  representative  duly 
appointed  by  the  court  of  the  state,  territory  or  jurisdic- 
tion where  the  bank  is  located. 


108  SEC.  180 

Usually  where  the  primary  administrator,  etc.,  has 
been  appointed  in  one  state,  another  state  will  reap- 
point  the  same  person  or  persons  as  ancillary  adminis- 
trators, etc.,  if  rights  of  creditors  or  citizens  of  the  latter 
state  will  not  be  prejudiced  thereby.  But  an  ancillary 
representative  should  be  appointed.  Minor  on  the  Con- 
flict of  Laws,  Sees.  104,  113. 


SEC.  181  109 

CHAPTER  IX. 
GIFTS  OF  DEPOSITS. 

181.  There  is  much  seeming  and  a  good  deal  of  real 
conflict  in  the  decisions  of  the  courts  of  the  different 
states  concerning  gifts  and  gifts  in  trust  of  bank  de- 
posits, checks,  etc.,  Therefore,  only  the  general  prin- 
ciples underlying  the  law  of  gifts  will  be  here  stated. 

We  have  seen  that  one  in  whose  name  a  deposit  stands 
is  presumed  to  be  the  owner  until  title  in  another  is 
shown;  but  when  ownership  is  proved  the  true  owner  is 
entitled  to  the  money  and  to  him  the  bank  will  be  liable. 
So  long  as  the  bank  has  no  notice,  and  in  some  instances 
no  reason  to  believe,  that  the  money  belongs  to  another, 
it  can  pay  to  the  one  who,  between  the  bank  and  him- 
self, is  the  depositor  and  owner.  But  when  there  is  a 
disputed  ownership  the  bank  must  be  careful  to  pay  to 
the  right  one.  When  gifts  are  made,  therefore,  while 
the  bank  is  made  no  better  nor  worse  by  the  mere  giving 
of  the  thing,  it  is  frequently  put  into  a  position  where  it 
does  not  know  just  what  to  do.  In  most  such  cases  the 
better  thing  to  do  is  to  refuse  to  pay  to  any  claimant 
without  the  consent  of  all,  and  if  suit  is  brought  by 
one,  to  pay  the  money  into  court  and  let  the  court 
determine  the  rights  of  the  parties,  taking  a  bond  of  in- 
demnity from  the  plaintiff  before  paying  over  the  money. 
Or  it  may  pay  to  the  one  appearing  to  have  title  to  the 
money  upon  his  giving  bond.  If  the  bank  wishes  to  have 
the  question  of  ownership  determined,  and  neither  party 
takes  the  step  to  have  the  question  settled,  the  bank 
may  be  permitted  to  bring  a  bill  of  inter-pleader,  asking 


110  SEC.  182 

the  court  that  these  parties  be  brought  in  and  have  an 
adjudication  of  their  rights.  In  such  case  the  bank  will 
not  suffer  any  loss  by  way  of  expense,  etc.  Whether 
such  bill  can  be  brought  is  a  question  of  local  practice. 
The  bank  could  not  ask  the  parties  to  interplead  if  it 
had  any  interest  in  the  money  itself;  but  where  upon  the 
death  of  a  depositor  there  is  money  in  bank,  the  owner- 
ship of  which  the  bank  wishes  determined,  the  right 
may  be  given.  Where  the  parties  can  agree  upon  a  set- 
tlement the  bank  can  pay  under  such  an  agreement,  but 
should  always  require  a  written  release  from  all  parties 
concerned,  and  as  an  agreement  to  do  something  which 
is  contrary  to  law  could  not  bind  one,  great  care  should 
be  taken. 

182.  Gifts. — Upon  the  death  of  a  person  having  money 
in  bank  claims  are  apt  to  be  made  by  various  persons 
that  the  decedent  made  a  gift  of  the  deposit.     If  a  valid 
gift  can  be  proved,  the  donee  is  entitled  to  it.     There 
may  be  several  claiming  as  a  gift.    At  the  same  time  the 
administrator   or   executor   might   claim    it.     The   bank 
must  pay  the  rightful  owner  or  it  will  be  called  upon  to 
pay  again. 

A  gift  is,  generally  speaking,  a  voluntary,  gratuitous 
transfer  of  the  title  and  possession  of  personal  property 
by  one  to  another.  Gifts  are  of  two  kinds;  gifts  inter 
vivos  and  gifts  causa  mortis. 

183.  Gifts  Inter  Vivos. — A  gift  inter  vivos  is  a  gift  made 
to  take  effect  during  the  lifetime  of  the  giver  (called  the 
donor).     To  be  valid,  there  must  be  an  intent  on  the 
part  of  the  donor  to  vest  the  title  in  the  donee  (the  one  to 
whom  given)  and  a  delivery  of  the  thing  to  the  donee, 
or  to  another  for  him,  though  the  delivery  need  not  neces- 
sarily be  made  at  the  same  time  the  intention  is  ex- 
pressed, so  long  as  there  be  a  delivery  to  complete  it. 
There  must  also  be  an  acceptance  by  the  donee,  though 


SEC.  183a  111 

this  is  usually  implied  from  the  conduct  of  the  donee, 
and  in  some  states  it  is  held  that  the  donee  need  not 
even  know  of  the  gift. 

The  intent  must  be  clearly  shown  as  a  gift  will  not 
be  presumed.  There  must  be  something  more  than  mere 
words.  There  must  be  a  delivery  of  the  thing.  If  it 
is  not  capable  of  actual  delivery  at  the  time,  there  must 
be  such  conduct  on  the  part  of  the  donor  as  can  be  con- 
strued as  a  clear  intention  to  part  with  the  dominion 
over  the  property.  The  delivery  of  a  written  instru- 
ment which  is  evidence  of  property,  when  executed  by 
the  donor,  would  be  sufficient  delivery.  Contract  rights 
can  be  delivered  only  by  a  delivery  of  the  written  evi- 
dences of  those  rights.  And  where  circumstances  make 
a  manual  delivery  impossible,  as  where  one  is  ill  and 
wishes  to  deliver  a  box,  trunk,  etc.,  which  he  cannot 
reach,  or  which  is  too  large,  a  symbolical  delivery,  as  the 
delivery  of  a  key,  will  suffice.  There  must  be  some  act 
manifesting  a  clear  intent  on  the  part  of  the  donor  to 
surrender  dominion  over  the  thing.  The  health,  condi- 
tions, surroundings,  and  all  the  circumstances  must  be 
considered  in  determining  whether  the  donor  parted 
with  the  ownership.  Where  the  donee  is  already  in 
possession,  it  is  not  necessary  that  there  be  a  delivery 
by  him  to  the  donor  and  a  redelivery  by  the  donor  to 
the  donee.  A  clear  indication  of  an  intent  to  vest  the 
title  in  the  donee  will  suffice. 

i83a.  Where  delivery  is  made  to  an  agent  for  de- 
livery to  the  donee  the  question  sometimes  arises  as  to 
whether  the  one  to  whom  the  article  was  delivered  was 
agent  for  the  donor  or  the  donee.  If  the  delivery  is 
made  to  the  agent  of  the  donor,  until  there  has  been  a 
delivery  by  the  agent  to  the  donee  the  gift  can  be  re- 
voked, or  recalled,  and  the  death  of  the  donor  before 
delivery  by  the  agent  would  operate  as  a  revocation 


112  SEC.  184 

of  the  agency,  causing  the  gift  to  be  invalid.  Where 
the  delivery  is  made  to  an  agent  or  trustee  of  the  donee 
(and  in  some  cases  it  is  held  that  delivery  to  a  third 
person  is  delivery  to  a  trustee  of  the  donee)  the  delivery 
is  complete.  A  gift  once  perfected  cannot  be  revoked, 
and  no  subsequent  possession  by  the  donor  can  give 
him  title  merely  by  virtue  of  his  having  been  the  original 
owner. 

184.  Gifts  to  Take  Effect  in  Future.— A  gift  to  take 
effect  in  the  future,  or  upon  a  contingency,  is  generally 
held  to  be  of  no  effect  as  a  gift  inter  vivos ;  though  where 
a  gift  is  absolute,  the  donor  parting  with  the  ownership 
as  a  present  gift,  the  fact  that  the  donor  is  entitled  to 
use  the  thing,  or  that  the  donee  is  to  perform  some  act 
in  regard  thereto,  does  not  invalidate  the  gift  otherwise 
perfected.     Such  is  a  gift  where  A  gives  to  B  a  deposit 
in  bank,  but  with  the  understanding  that  A  is  to  have 
the  interest  during  his  life,  provided  there  is  a  surrender 
of  ownership.    If  A  has  thg  right  to  withdraw  any  of  the 
money  there  is  no  gift.     A  gift  which  is  not  to  take 
effect  until  the  donor's  death  is  a  testamentary  disposi- 
tion of  property,  and  unless  it  is  made  in  conformity  with 
the  law  of  wills,  or  other  testamentary  law,  is  invalid. 

185.  Donatio  Causa  Mortis. — A  donatio  causa  mortis 
is  a  gift  made  in  contemplation  of  death,  revokable  at 
any  time  before  death  and  taking  effect  absolutely  only 
in   case  the   decease  of  the   donor   results   from   causes 
which  led  him  to  believe  death  was  impending  when  he 
made  the  gift.    As  in  a  gift  inter  vivos,  there  must  be  an 
intention  to  give  and  a  delivery  of  the  thing,  actual,  con- 
structive, or  symbolical,  showing  a  complete  surrender 
of  dominion  over  the  thing;  but  the  title  in  the  donee  is 
subject  to  being  divested  and  reverting  to  the  donor  if 
death  does  not  ensue  as  expected.     Where  property  is 
given  by  will  the  thing  is  not  delivered  during  the  life 


SEC.  186  113 

of  the  donor.  Both  a  will  and  a  gift  causa  mortis  can  be 
revoked  at  any  time  before  the  donor's  death,  but  in  a 
gift  causa  mortis  there  must  be  a  complete  surrender  of 
ownership  so  far  as  such  surrender  is  possible,  during 
the  life  of  the  donor. 

186.  Almost  any  personal  property  can  be  the  subject 
of  a  gift,  but  the  gifts  with  which  a  banker  is  concerned 
and  the  phases  of  the  law  of  gifts  which  are  apt  to  arise 
in  his  business  we  desire  more  particularly  to  note.    Just 
now,  therefore,  we  are  interested  in  gifts  of  deposits  in 
bank,  bank  checks,  etc. 

187.  The  law  of  the  place  where  a  gift  is  made  deter- 
mines its  validity. 

188.  Gifts  can  be  made  of  funds  on  deposit  in  bank, 
whether  represented  by  pass-books  or  certificates  of  de- 
posit.   Tucker  v.  Tucker  (Iowa),  116  N.  W.,  119. 

189.  What   Constitutes. — Where  a   desire   to   make   a 
gift  of  a  deposit  is  accompanied  by  such  acts  as  the  donor 
believes  a  complete  transfer  of  the  power  and  dominion 
over  the  fund,   even  though   the   money  has   not  been 
transferred  on  the  books  of  the  bank,  the  intent  to  give, 
coupled  with  the  complete  surrender  of  the  right  to  con- 
trol the  money,  constitutes  a  valid  gift.     A  intended  to 
give  to  B  money  on  deposit  in  A's  name.    A  went  with 
B  to  the  bank  and  told  the  cashier  of  her  desire  to  give 
B  the  money.     The  cashier  advised  A  that  her  wishes 
could  be  carried  out  by  giving  B  a  power  of  attorney  to 
draw  out  the  money  in  A's  name.     This  was  done,  and 
B  withdrew  part  of  the  money.     Creditors  of  A  then 
sought  to  attach  the  balance  standing  in  A's  name,  but 
it  was  held  that,  under  all  the  circumstances,  there  was 
a   sufficient   transfer  of   dominion    over    the    property, 
coupled  with  the  intent  to  make  the  gift,  to  constitute  a 
valid  gift.    Murphy  v.  Bordwell,  89  Minn.,  54. 

If  A  delivers  money  to  a  bank  as  a  deposit  for  B,  in- 


114  SEC.  190 

tending  to  make  a  present  gift  of  it  to  B,  this  is  a  suf- 
ficient delivery.  A  delivery  of  the  pass-book  to  the 
donee  is  sufficient  delivery,  and  a  delivery  of  the  pass- 
book with  an  order  for  the  full  amount  of  a  deposit  in 
a  savings  bank  is  generally  held  to  be  a  valid  gift,  when 
coupled  with  the  intent  to  make  the  gift,  even  though 
the  donor  dies  before  presentation  of  the  order.  So  it 
has  been  held  that  if  a  depositor  surrenders  his  book  to 
the  bank,  asks  the  bank  to  transfer  the  account  on  its 
books  to  another,  and  takes  a  new  book  in  the  donee's 
name,  this,  coupled  with  the  intent  that  it  should  vest 
in  the  donee,  would  in  some  states  be  held  a  valid  gift; 
in  others  perhaps  a  delivery  of  the  book  to  the  donee 
would  be  required;  while  in  Pennsylvania  it  is  held  that 
the  mere  delivery  of  a  pass-book  will  not  work  a  trans- 
fer; being  mere  evidence  of  an  account,  the  delivery  is 
not  a  delivery  of  the  money.  And  in  any  event  if  the 
donor  did  not  deliver  the  book  because  he  did  not  mean 
to  make  it  a  gift  during  his  lifetime  there  would  be  no 
valid  gift.  If  the  donor  gives  the  deposit  book  and  an 
order  to  the  donee  and  the  donee  notifies  the  bank,  this 
would  be  a  valid  gift  in  those  states  where  the  delivery 
of  the  book  is  construed  as  a  delivery  of  the  money  rep- 
resented. In  the  case  of  savings  banks  the  by-laws  of 
the  bank  should  be  complied  with  wherever  possible, 
but  if  a  gift  is  otherwise  established,  the  mere  fact  that 
the  assignment  has  not  been  made  as  required  by  the  by- 
laws will  not  in  itself  defeat  the  gift.  The  omission  of 
the  assignment,  when  taken  with  other  facts  and  cir- 
cumstances, might  be  held  to  show  the  intention  of  the 
alleged  donor.  Such  rules  are  for  the  protection  of  the 
bank  and  its  depositors  against  fraud  and  mistakes,  but 
cannot  defeat  the  rights  of  parties. 

190.  Check. — As  we  noted  before,  death  is  held  to  re- 
voke all  unaccepted  checks.     And  cases  have  held  that 


SEC.  191  115 

the  donee  of  a  check  must  have  it  turned  into  money  be- 
fore the  donor's  death  or  transfer  it  to  a  bona  fide  holder 
for  value.  But  where  a  valid  gift  otherwise  established 
has  been  completed  during  the  life  of  the  donor,  his  death 
before  transfer  will  not  invalidate  the  gift  merely  be- 
cause one  of  the  evidences  of  the  gift  is  a  check.  If  a 
check  delivered  as  a  gift  has  been  transferred  by  the 
donee  to  a  bona  fide  holder,  the  estate  would  be  liable 
on  the  check,  and  the  bank  could  not  be  held  for  paying 
same  without  notice. 

191.  What  the  Courts  Have  Held. — In  a  recent  case 
in  New  York  a  depositor  in  a  savings  bank  delivered  her 
pass-book  to  the  donee,  with  an  order  upon  the  bank  to 
pay  the  donee  "on  producing  my  deposit  book  No.  — ," 
the  full  balance.  It  was  held  that  this  was  a  sufficient 
delivery  to  constitute  a  valid  gift,  though  the  depositor 
died  before  the  book  and  order  were  presented.  The 
bank  having  paid  upon  presentation  of  the  book  and 
order,  it  could  not  be  held  by  the  administrator  of  the 
deceased  depositor.  McGuire  v.  Murphy,  94  N.  Y.  $., 
1005.  It  will  be  noted  that  there  is  not  absolute  harmony 
in  the  decisions  in  the  different  states.  In  some  cases 
savings  bank  deposits  are  treated  differently,  but  this 
appears  to  be  because  the  bank  had  paid  upon  an  order 
presented  with  the  book,  and  the  bank  was  entitled, 
under  its  by-laws,  to  a  discharge  upon  such  payment. 
In  other  cases  the  distinction  between  savings  bank  ac- 
counts and  accounts  in  other  banks  is  not  drawn. 

In  Virginia  it  has  been  held  that  if  A,  being  indebted 
to  his  son,  -B,  makes  a  deposit  in  bank  in  B's  name,  the 
law  will  presume,  in  the  absence  of  clear  evidence  to  the 
contrary,  that  the  deposit  was  made  in  payment  of  the 
debt  to  B,  and  not  as  a  gift.  If  the  deposit  could  be  re- 
garded as  a  gift  to  B,  B  would  have  a  claim  on  the  debt 
against  the  estate.  It  has  also  been  held  that  if  A  owes 


116  SEC.  191 

B  and  makes  a  deposit  in  B's  account  this  is  not  a  pay- 
ment unless  B  consents,  one  case  holding  that  where  A 
deposits  for  B  the  bank  is  merely  the  agent  of  A  to  pay  B. 

If  A  deposits  money  in  bank  and  has  an  entry  made  in 
the  book  to  the  effect  that  the  money  is  to  be  paid  to  X 
upon  her  death,  this  is  not  a  gift,  as  the  owner  did  not 
part  with  the  control  during  her  lifetime.  Jones  v.  Crisp, 
71  Atlantic,  515.  Merely  adding  the  name  of  another 
person  whose  signature  the  bank  shall  pay  on  does  not 
constitute  a  gift.  Schipper  v.  Kempkes,  (N.  J.)  67  Atlantic, 
1042.  In  a  Connecticut  case,  where  A  intended  to  give  B  a 
deposit  in  bank,  but,  having  lost  her  book,  drew  an  order  for 
the  money  as  required  by  the  by-laws,  and  in  delivering 
the  order  to  B  said  it  was  subject  to  her  use  during  her 
lifetime,  the  court  held  that  there  was  a  sufficient  trans- 
fer of  ownership,  notwithstanding  the  right  of  the  "use" 
of  the  money  during  her  lifetime.  The  court  found  that 
she  was  to  have  the  profit  on  the  money,  but  the  gift  was 
complete.  It  was  B's,  subject  only  to  her  right  to  have 
the  interest.  Candee  v.  Conn.  Savings  Bank,  71  Atl.,  551. 

A  delivery  of  a  certificate  of  deposit  with  the  intention 
that  the  donee  should  have  title  thereto,  is  a  valid  gift, 
though  the  one  to  whom  delivered  for  the  donee  retains 
possession  until  after  donor's  death,  the  donor  having 
intended  delivery.  Nelson  v.  Olson  (Minn.),  121  N.  W., 
609.  But  a  certificate  procured  by  A  in  B's  name,  and 
never  delivered,  may  be  returned  by  A  and  the  money 
recovered.  In  Basket  v.  Hassall,  107  U.  S.,  602,  the 
United  States  Supreme  Court  held  that  where  A  de- 
livered to  B  a  certificate  of  deposit  endorsed  by  the  payee 
to  B,  but  to  be  paid  "not  until  my  death,"  this  was  not  a 
valid  gift  causa  mortis  because,  in  stating  that  it  was 
not  to  be  paid  until  after  his  death  the  donor  did  not  sur- 
render control  over  the  money  or  deliver  it  to  the  donee. 
In  a  gift  causa  mortis,  while  the  property  reverts  to  the 


SEC.  191  117 

donor  in  case  he  recovers,  yet  there  must  be  complete 
surrender  of  ownership,  power  or  control  over  the  thing 
in  so  far  as,  and  to  the  extent  that,  it  is  possible  for  the 
donor  to  relinquish  his  present  ownership.  Here  the 
donor  stated  that  it  was  not  to  be  paid  until  after  his 
death.  A  case  which  seems  in  conflict  with  this,  but 
which  really  is  not,  is  the  case  of  Phinney  v.  State,  36 
Wash.,  236.  A,  in  a  dying  condition,  desired  to  give  a 
friend  who  had  remained  with  him  in  his  sickness  his 
deposit  in  bank,  in  another  state.  The  only  possible 
way  was  by  ordering  the  bank  to  pay  to  the  donee,  B. 
He  did  not  know  his  exact  balance,  but  thought  it  was 
more  than  $4,000.  He  had  the  doctor  draw  a  check 
payable  to  B,  and  delivered  same  to  B,  saying,  "If  I  don't 
get  over  this  I  want  Frank  to  get  my  money."  He  was 
to  get  the  money  back  if  he  lived,  but  there  was  no 
string  tied  to  the  gift.  B  could  go  at  once  and 
get  the  money.  But  he  could  make  immediate  collec- 
tion only  by  mail.  A  also  wrote  the  bank,  sending  his 
book  to  have  it  balanced.  The  book  reached  the  bank, 
but  the  letter  with  the  check  was  delayed  in  reaching  the 
bank  until  after  the  bank  had  been  notified  of  A's  death. 
A  had  no  heirs,  no  next  of  kin,  no  creditors,  and  the 
state  would  be  entitled  to  the  money  if  the  gift  were  not 
held  valid.  The  court  held  that,  under  all  the  circum- 
stances, this  was  a  valid  gift  causa  mortis.  A  intended 
that  B  should  receive  the  money;  the  intention  was 
clearly  proved ;  there  were  no  adverse  claimants  except 
one  who  claimed  the  money  because  no  other  did,  and  A 
had  done  everything  possible  to  transfer  the  money  to 
B  in  his  lifetime.  It  is  true  that  this  is  contrary  to  the 
law  that  death  revokes  a  check.  In  Pullen  v.  Placer 
County  Bank,  138  Cal.,  169,  the  donor  gave  the  donee  a 
check,  requesting  that  it  be  not  presented  until  after  his 
death.  The  Code  in  that  state  provides  that  a  gift  to  be 


118  SEC.  192 

valid  must  be  accompanied  by  a  delivery  of  the  thing  if 
it  is  capable  of  delivery.  And  besides,  the  donor  re- 
quested that  the  check  be  not  presented  until  his  death, 
so  there  was  no  delivery.  Where  the  donor  retains  con- 
trol of  the  thing  it  is  generally  held  that  there  is  no  gift. 
In  the  Washington  case  the  control  was  surrendered  as 
completely  as  the  circumstances  of  the  case  would  per- 
mit. 

192.  With  these  conflicting  cases  you  will  doubtless  still 
wonder  what  the  law  is,  but  a  careful  study  of  the  main 
principles  that  there  must  be  an  intent  and  a  delivery 
will  help  to  make  the  reconcilement  less  difficult.  The 
relationship  of  the  parties,  the  age,  physical  and  mentaT 
condition  of  the  donor,  the  circumstances  under  which 
the  gift  is  made  and  the  conduct  evincing  the  donor's 
intent  should  all  be  taken  into  consideration.  While  the 
court  will  seek  to  protect  rightful  owners  against  fraud, 
in  the  absence  of  fraud  it  will  endeavor  to  carry  out  the 
intention  of  the  donor  where  that  intent  can  be  proved. 

I92a.  Gift  to  Save  Administration  on  Estate. — If  a 
person  desires  his  property,  upon  his  death,  to  go  to  one 
other  than  those  to  whom  the  law  would  give  it,  he  can 
provide  therefor  by  will.  If  he  wishes  to  "fix"  his  prop- 
erty so  that  a  will  and  administration  can  be  prevented, 
the  only  way  he  can  do  it  is  by  giving  the  property  dur- 
ing his  lifetime.  He  can  give  it  to  another,  to  be  owned 
jointly  with  himself.  Kelly  v.  Beers  (N.  Y.),  86  N.  E., 
980.  But  if  there  is  any  string  tied  to  it,  so  that  he  can 
revoke  it  during  his  lifetime,  it  is  not  a  gift.  Where  it 
can  be  done,  the  bank,  the  donee  and  everybody  inter- 
ested should  be  made  fully  aware  of  the  gift  and  a  com- 
plete understanding  had,  that  the  title  to  the  property  is 
vested  in  the  donee,  absolutely,  to  be  owned  jointly  by 
him  with  the  donor,  and  that  the  survivor  shall  take  all 
not  withdrawn  on  the  death  of  either.  As  such  gifts, 


SEC.  193  119 

however,  are  likely  to  be  contested  anyhow,  a  will  is 
recommended  where  the  amount  justifies  it. 

193.  Check  of  a  Third  Party. — A  check  drawn  by  A, 
payable  to  B,  may  be  the  subject  of  a  valid  gift  by  B  to 
his  donee,  if  the  requirements  of  intent  and  delivery,  are 
present;  and  if  otherwise  valid,  the  fact  that  the  check 
was  not  endorsed  will  not  invalidate  the  gift.  And  this 
is  the  law  in  Pennsylvania.  Rhodes  et  al.  v.  Childs,  64 
Pa.,  18.  And  so  a  note  of  A  to  B  can  be  made  the  subject 
of  a  gift  by  B,  but  a  donor  cannot  give  his  own  note,  as 
this  is  merely  a  promise  to  give  something  and  there  is 
no  consideration  upon  which  the  promise  could  be  en- 
forced. 


120  SEC.  194 


CHAPTER  X.— MISCELLANEOUS. 

194.  False  Pretenses. — When  a  check  is  given  by  one 
who  has  not  funds  in  the  bank  upon  which  it  is  drawn, 
and  knows  he  has  no  funds,  whether  or  not  his  act  con- 
stitutes an  offense  for  which  he  can  be  criminally  prose- 
cuted depends  upon  the  law  of  the  state.     Generally  the 
mere  giving  of  a  check  without  sufficient  funds  to  meet  it 
is  not  in  itself  a  crime.  It  may  be  that  the  drawer  has  made 
an  innocent  mistake,  or  he  may  have  an  arrangement  with 
the  bank  by  which  the  check  will  be  paid,  as  where  he 
has  given  security  for  overdrafts.    But  where  one  know- 
ingly issues  a  worthless  check  to  one  who,  on  the  strength 
of  the  check,  parts  with  money  or  property,  he  is,  in  most 
states,   guilty   of   obtaining   money   or   property   under 
false  pretenses.     If  he  obtained  no  money  or  property, 
but  gave  the  worthless  check  for  an  existing  indebted- 
ness, he  would  not  be  "obtaining"  money  or  property. 
And  it  has  been  held  that  obtaining  credit  at  a  bank  for 
a  worthless  check  is  not  punishable  under  a  statute  pun- 
ishing the   obtaining  of   money   under   false   pretenses. 
Maxey  v.  State  (Arkansas),  108  S.  W.,  1135.    There  must 
be  a  false  representation — an  inducement  to  part  with 
something  which  would  not  have  been  parted  with  but 
for  the  inducement  offered  by  the  giving  of  the  worth- 
less check — and   something  obtained,   the   obtaining   of 
which,  in  such  manner,  is  made  an  offense  by  the  laws  of 
the  state. 

195.  Overdrafts. — Where  a  financially  responsible  de- 
positor innocently  draws  a  check  for  an  amount  in  excess 
of  what  the  bank  owes  him,  or  where  he  has  made  ar- 
rangements with  the  bank,  by  depositing  collateral  or 


SEC.  196  121 

satisfying  the  bank  as  to  his  financial  responsibility,  to 
overdraw,  the  payment  of  a  check  in  excess  of  the  de- 
positor's credit  is  justified.  City  N.  B.  v.  Burns,  68  Ala., 
267;  44  Am.  Reports,  138.  The  bank  is  not  under  any 
duty  to  pay  an  overdraft.  Merchants  National  Bank  v. 
National  Bank  of  Commerce,  139  Mass.,  513. 

196.  A  Loan. — An  overdraft  is  a  loan  of  money  to  the 
depositor  who  overdraws,  and  is  payable  on  demand.    If 
the  officers  of  a  corporation,  or  an  agent,  be  authorized 
to  make  overdrafts,  they  will  have  implied  authority  to 
give  a  note  for  such  overdrafts.     Hennesy  Bros,  etc.,  v. 
Bank,  129  Fed.,  557.     The  depositor  who  overdraws  is 
liable  to  the  bank,  and  where  he  subsequently  makes  a 
deposit  without  an  agreement  to  the  contrary,  the  de- 
posit can  be  applied  in  payment  of  the  overdraft.  Nichols 
v.  State,  46  Neb.,  715 ;  65  N.  W.,  774.    But  no  interest  can 
be  charged  on  an  overdraft,  unless  there  has  been  an 
agreement  for  interest,  until  payment  thereof  has  been 
demanded,  when  interest  can  be  recovered  from  the  date 
of  demand.    Casey  v.  Carver,  42  111.,  225. 

197.  Care  in  Allowing. — While  it  may  be  justified,  no 
overdraft  should  be  allowed  unless  the  board  of  directors, 
or  an  officer  whom  they  have  authorized,  sanctions  it. 
An  agent  does  not  derive  any  authority  to  overdraw  by 
simply  being  empowered  to  withdraw  a  deposit.     Mer- 
chants N.  B.  v.  Nichols  &  Shepard  Co.,  79  N.  E.,  38  (111.). 
Where  an  overdraft  is  allowed  without  the  exercise  of 
prudence  in  ascertaining  the  financial   standing  of  the 
person   overdrawing,   or  where   an   officer  of  the   bank 
permits  another  officer  to  withdraw,  directors  and  officers 
will  be  held  to  the  same  responsibility  as  in  the  case 
of  any  other  loans.     And  an  overdraft  may  be  criminal 
misapplication  of  the  bank's  money.     U.  S.  v.  Heinze, 
161  Fed.,  425. 

198.  Receiving   Deposits  When  Bank  Is   Insolvent — 


122  SEC.  199 

Some  states  have  statutes  which  make  it  a  criminal  of- 
fense for  officers  of  banks  to  receive  deposits  when  the 
bank  is  known  to  be  hopelessly  insolvent.  The  wording 
of  the  statute  is  different  in  the  various  states,  and  the 
courts  of  each  jurisdiction  have  construed  the  respec- 
tive statutes  differently.  Where  such  statute  is  in  force 
the  officers  of  a  national  bank  are  not  amenable  thereto. 
Easton  v.  Iowa,  188  U.  S.,  220. 

199.  National    Banks. — There    is    no    statute    of    the 
United  States  making  it  a  crime  for  a  national  bank  to 
receive  deposits  when  insolvent,  but  if  deposits  are  received 
by  any  bank,  state  or  national,  when  the  bank  is  known 
by  its  officers  to  be  hopelessly  insolvent,  the  officers  may 
be  personally  liable,  and  the  deposits  can  be  recovered 
by  the  depositors,  provided  the  money  can  be  traced  into 
the  hands  of  the  receiver. 

200.  Tracing   Trust   Funds. — If  the   bank   has   in   its 
vaults  $200,  at  the  opening  of  business,  then  A  deposits 
$1,000,  after  which  the  bank  pays  to  B  $700,  this  would 
leave  $500  in  the  bank.     If  there  were  no  other  transac- 
tions, and  the  bank  was  closed  on  account  of  insolvency, 
the  $500  coming  into  the  receiver's  hands  could  be  re- 
covered by  A.     It  would  be  presumed  that  the  bank 
paid  out  its  own  money  first.     For  the  remaining  $500 
A  would  have  a  claim  as  a  general  creditor.    But  where 
a  bank  has  apparently  been  insolvent  for  a  long  time,  the 
matter  of   tracing   funds  is  a  difficult  one,  and  the  claim- 
ant on  any  transaction,  whether  deposit,  collection  item 
or  "trust  fund,"  must  show  that  his  money,  or  an  amount 
equal  thereto,  has  remained  in  the  bank  at  all  times  since 
he  deposited  it,  or  since  the  bank  received  it,  until  the 
closing,  and  that  it  passed  into  the  receiver's  hands,  who 
holds  so  much  more  money  by  reason  of  that  transac- 
tion.   In  the  illustration  given  above,  if  C  had  deposited 
$100  after  B  withdrew  the  $700,  there  would  be  $600  in 


SEC.  201  123 

the  bank  at  the  time  of  closing,  but  only  $500  would  re- 
main of  the  amount  A  deposited.  If  C  does  not  claim  his 
$100  in  full,  this  does  not  give  A  the  right  to  the  $600, 
because  he  can  only  trace  $500  of  his  money  as  swelling 
the  amount  in  the  receiver's  hands.  Lowe  v.  Jones,  192 
Mass.,  94;  Commissioners  v.  Lowe,  192  Mass.,  94;  Com- 
missioners v.  Strawn,  157  Fed.,  49. 

The  question  next  arises,  if  $600  is  traced  into  the 
receiver's  hands,  but  there  are  many  whose  deposits  or 
moneys  have  been  received  when  their  receipt  was 
wrongful,  and  none  can  affirmatively  show  that  his  par- 
ticular money  is  still  in  the  bank,  how  shall  the  fund 
be  divided?  The  $600  remains  in  the  bank,  but  no  one  of 
the  claimants  can  trace  and  identify  it  as  his  money.  In 
such  cases  it  has  been  held  in  some  states  that  the  last 
deposit  made  is  to  be  paid  first,  etc.,  the  deposits  and  re- 
ceipts being  returned  in  the  reverse  order  of  their  re- 
ceipt, and  this  seems  the  more  logical  deduction  if  trac- 
ing is  to  be  required.  Cherry  v.  Oklahoma  Territory,  89 
Pac.,  190,  192.  In  one  or  two  states  it  has  been  held 
that  the  fund  should  be  ratably  distributed  among  all 
those  who  claim  a  preference.  Piano  Co.  v.  Auld  (N.  D)., 
86  N.  W.,  21.  As  there  must  be,  first,  a  fund  to  trace,  and 
secondly  a  tracing  of  that  fund,  it  would  seem  that  those 
claiming  priority  over  other  creditors  should  be  required 
to  follow  their  money  into  the  hands  of  the  receiver,  or 
share,  not  in  a  distribution  of  an  unidentified  fund,  but 
in  the  general  distribution  with  all  creditors;  otherwise 
the  money  of  the  general  creditor,  who  may  have  par- 
ticipated in  increasing  the  fund  in  the  bank,  is  used  to 
pay,  in  full,  one  who  has  not  established  his  right  to  a 
preference.  In  re  North  River  Bank,  60  Hun.  (N.  Y.), 
91 ;  Bayor  v.  Tr.  &  Sav.  Bank.  157  111.,  62. 

201.  Where  checks  or  other  items  have  been  deposited, 
if  they  are  in  the  bank  when  the  receiver  takes  charge, 


124  -  SEC.  202 

they  should  be  returned  to  the  depositors,  if  under  the 
same  circumstances  money  would  have  to  be  returned; 
but  unless  the  bank  was  hopelessly  insolvent  and  known 
by  the  officers  to  be  so,  (See  Easton  v.  Iowa,  188  U.  S., 
220),  the  depositors  have  become  creditors  of  the  bank 
and  are  not  entitled  to  a  return  of  the  money  or  the 
items.  Quin  v.  Earle,  95  Fed.,  728.  If  the  items  would 
be  returnable,  but  have  been  sent  on  the  way  to  collec- 
tion, then  the  proceeds  when  received  should  be  turned 
over  to  the  owner  of  the  item.  Showater  v.  Cox  (Tenn.), 

37  S.  W.  286;  97  Tenn.,  547. 

If  there  be  no  actual  cash  proceeds,  or  no  actual  re- 
mittance of  the  amount  collected,  but  the  item  was  col- 
lected by  a  change  of  credits,  or  by  checks  on  the  same 
bank,  the  owner  must  prove  his  claim  with  all  other 
creditors.  Beard  v.  District,  88  Fed.,  375 ;  Bank  v.  Dowd, 

38  Fed.,  172.    He  cannot  be  paid  in  full  with  money  that 
depositors  have  put  in,  or  other  creditors,  who  are  no 
more  to  blame  for  the  failure  of  the  bank  than  he  is. 
The  better  considered  cases  hold  that  parties  who  deal 
with   banks  are  presumed  to  know  and  assent  to  the 
customs  which  banks  resort  to  to  make  collections,  etc. 
Freemans  N.  B.  v.  Natl.  Tube  Works,  151  Mass.,  413; 
Aebi  v.  Bk.  of  Evansville  (Wis.),  102  N.  W.,  329.    It  is 
not  the  intention  of  the  writer  to  deal  with  collections  in 
this  volume,  but  the  matter  is  adverted  to  here,  as  many 
items  deposited,  while  received  by  the  banks  as  deposits, 
must  be  collected  by  them  before  they  are  real  deposits. 
The  courts  have  wrangled  with  the  question  of  "tracing" 
of  trust  funds,  and  there  is  still  much  conflict,  but  the 
statement  made  above  is  in  accord  with  the  principles 
which  the  federal  courts  have  established  and  which  are 
gradually  becoming  the  law  and  the  justice  in  the  states. 

202.  The  "Insolvent  Bank"  of  Tightville,  being  hope- 
lessly insolvent  and  known  by  its  officers  to  be  so,  ac- 


SEC.  202  125 

cepts  from  A  a  check  drawn  payable  to  A,  by  B,  on  the 
First  National  Bank  of  Moneyville,  and  gives  A  credit 
on  his  account.  A  has  endorsed  the  check  in  blank.  "In- 
solvent Bank"  transmits  the  item  to  its  New  York  Corre- 
spondent, endorsing  it  in  the  ordinary  manner,  "Insol- 
vent Bank,  Tightville,  All  prior  endorsements  guaran- 
teed," etc.  The  New  York  Correspondent  presents  it  at 
the  National  Bank  of  Moneyville  and  either  receives  the 
cash  or  credit  to  its  account  for  the  amount.  The  New 
York  Correspondent  in  turn  credits  the  account  of  the 
"Insolvent  Bank"  for  the  amount  and  notifies  the  "Insol- 
vent Bank"  that  the  item  has  been  paid.  Now  there  has 
been  no  money  passed  to  the  "Insolvent  Bank"  in  the 
transaction  and  there  is  no  "fund"  which  has  come  into 
the  "Insolvent  Bank"  which  can  be  traced.  In  the  ordi- 
nary course  of  events  the  depositor,  A,  would  have 
checked  against  the  credit  given  him  when  he  deposited 
the  item.  If  it  had  been  returned  unpaid  the  "Insolvent 
Bank"  could  have  charged  it  back  to  his  account.  Had 
the  item  been  endorsed  by  A  "for  collection  only,"  and 
with  the  understanding  that  no  credit  would  be  given 
until  actually  paid,  or  had  there  been  other  evidence 
that  the  item  remained  A's,  the  New  York  Correspond- 
ent Bank  could  not  have  treated  it  as  "Insolvent  Bank's" 
property,  but  A  could  follow  it  and  recover  the  proceeds. 
But  as  there  was  no  mark  of  title  in  any  other  than  the 
"Insolvent  Bank,"  upon  being  notified  of  the  closing  of 
"Insolvent  Bank,"  the  Correspondent  Bank  can  off- 
set the  credit  balance  of  "Insolvent  Bank,"  in- 
cluding the  amount  of  items  sent  for  collection, 
unless  the  item  shows  on  its  face  that  title 
thereto  remains  in  the  depositor,  or  there  is  some  other 
notice  to  the  Correspondent  Bank  that  the  item  is  not 
the  property  of  "Insolvent  Bank,"  against  any  balance 


126  SEC.  203 

the  Correspondent  Bank  had  in  the  "Insolvent  Bank," 
or  on  any  indebtedness  owing  by  the  "Insolvent  Bank" 
to  the  Correspondent  Bank  in  the  ordinary  course  of 
business.  And,  while  the  depositor  of  checks  on  other 
banks  usually  can  be  charged  back  with  the  amount  if  the 
item  is  not  collected,  and  he  usually  has  only  the  priv- 
ilege, and  not  the  absolute  right,  to  check  against  it  be- 
fore collected,  he  is,  nevertheless,  generally  regarded  as 
creditor  of  the  bank  until  the  item  is  charged  back.  Natl. 
Commercial  Bank  v.  Miller,  77  Ala.,  168;  Balbach  v.  Fre- 
linghuysen,  15  Fed.,  675;  Bank  v.  Theummler  (111.),  62 
N.  E.,  932;  and  cases  cited  in  Sec.  201. 

MONEY. 

203.  Legal  Tender. — Gold  coin  is  legal  tender  for  its 
nominal  value  when  not  below  the  limit  of  tolerance  in 
weight;  when  below  that  limit  it  is  legal  tender  in  pro- 
portion to  its  weight;  standard  silver  dollars  and  Treas- 
ury Notes  of  1890  are  legal  tender  for  all  debts,  public 
and  private,  except  where  otherwise  expressly  stipulated 
in  the  contract;  subsidiary  silver  (silver  coins  of  smaller 
denominations  than  $i)  is  legal  tender  to  the  extent  of 
$10;  minor  coins   (nickels  and  cents)   to  the  extent  of 
twenty-five  cents  in  any  one  payment,  and  United  States 
notes  for  all  debts,  public  and  private,  except  duties  on 
imports  and  interest  on  the  public  debt.     Gold  certifi- 
cates, silver  certificates  and  national  bank  notes  are  not 
legal  tender  money.     Gold  and  silver  certificates  are  re- 
ceivable for  all  public  dues,  and  national  bank  notes  are 
receivable  for  all  public  dues  except  duties  on  imports, 
and  may  be  paid  out  for  all  public  dues,  except  interest 
on  the  public  debt. 

204.  Fraudulent  Notes. — The  act  of  June  30,  1876,  Sec.  5, 
provides  that  all  United  States  officers  charged  with  the 


SEC.  204 


127 


receipt  or  disbursement  of  public  moneys,  and  all  officers 
of  national  banks,  shall  stamp  or  write  in  plain  letters 
the  word  "counterfeit,"  "altered,"  or  "worthless,"  upon 
all  fraudulent  notes  issued  in  the  form  of  and  intended  to 
circulate  as  money  which  shall  be  presented  at  their 
places  of  business;  and  if  such  officer  shall  wrongfully 
stamp  any  genuine  note  of  the  United  States,  or  of  the 
national  banks,  they  shall,  upon  presentation,  redeem 
such  notes  at  the  face  value  thereof. 


INDEX. 

(All  references  are  to  sections.) 

ACCEPTANCE 

see  CERTIFICATION 
ADMINISTRATOR 

act  of  one  binds  all,  86 

authority  of,  to  deposit,  36 

deposit  of,  36 

payment  to,  179 

should  be  appointed  by  local  court,  180 
AGENT 

account  of,  9,  36 
ALTERATION 

avoids  instrument,  138 

in  date  of  check,  138 

of  check  before  certification,  130, 
after,  130 

AMOUNT 

deposited,  38a 

for  which  check  may  be  drawn,  75 

of  check,  75 

not  guaranteed  by  bank,  142 
written  words  prevail  as  to,  74 

ASSIGNMENT 

check  generally  not,  75,  150 

against  particular  fund,  151 
of  deposit,  150 

ATTACHMENT,  147;  see  GARNISHMENT 

bank  not  subject  to,  153 

before  judgment,  147 

depositor's  property,  153 

items  for  collection,  149 

money  assigned  by  depositor,  150 

money  in  depositor's  name,  152 

paid  to  holder  of  check,  105 
belonging  to  another,  148 
set  aside  on  certification,  148 

ATTORNEY 

deposit  of,  36 
BAILMENT,  i 

BALANCE  AND  RETURN  OF  PASS  BOOK 
Balance  and  return  of  pass  book 

see  PASS  BOOK 

BANK 

books,  examination  of,  3p-886 

can  not  deny  ownership  of  aepositor,  39 

issue  certificate  of  deposit,  when,  42 
relation  of,  to  depositor,  I 
under  no  duty  but  to  pay,  100 


(All  references  are  to  sections.) 

BANKRUPTCY 

preference  in,  175 

right  of  set-off  in,  172 
BEARER 

check  payable  to,  65,  88 

BY-LAW 

can  not  bind  depositor  on  mistake,  38a 
valid  when  reasonable,  58 

CASHIER'S  CHECK 

can  not  be  countermanded,  rooa 

CASHING  CHECK 
on  other  bank,  88e 

CERTIFICATE  OF  DEPOSIT,  40 
bank  can  not  issue  when,  42 
demand  must  be  made  on  when,  46 
due  when,  46 
evidence  only,  48 
holder  of  is  general  creditor,  12 

except  by  statute,  12 
interest  on,  49 
is  not  payment  until  itself  paid,  4Qa 

except  to  issuing  bank,  4Qa 
is  payable  at  bank,  43 
lost,  45 

negotiable  when,  41 
payment  of 

on  forged  endorsement,  45 

without  endorsement,  44 
statute  of  limitations  runs  when,  49 
stolen  (see  STOLEN  CHECK),  88 
surrender  should  be  required  on  payment,  43 
when  a  loan,  soc 

CERTIFICATION  OF  CHECK 
acceptance  of  bank,  118 
alteration  of  check  before,  130 

after,  130 

attachment  of  deposit  after,  148 
bank  not  bound  to  make,  109 
binding  on  bank  when  made,  122 

though  bank  made  mistake,  129 

though  not  entered  on  books,  127 
by  whom  made,  121 

officer,  of  his  own  check,  123 

other  officer's  check,  123 
care  in  making,  129 
countermand  after,  99,  100,  I3ib 
not  binding  on  depositor  when,  I3ib,  142 
effect  of,  124 
false,  binds  bank,  13  ic 

criminal,  131 

penalty  for,  I3ic 


(All  references  are  to  sections.)  Ill 

CERTIFICATION  OF  CHECK  —Continued, 
forged  check,  129 
for  drawer,  125 

holder,  126 

more  than  drawer  has  to  his  credit,  13  ic 
guarantees  signature  of  drawer,  129 

but  not  endorsements,  129 
in  writing  but  not  on  check,  119 
makes  bank  debtor  to  holder,  122 
must  be  in  writing,  119 
post  dated  check,  122 
promise  of  bank  to  make  in  future,  131 
raised,  130 
verbal,  119 
what  checks,  122 
what  is,  120 
CHECK 

acceptance  of— see  CERTIFICATION 

altered,  see  ALTERATION,  RAISED  CHECKS 

amount  of,  74,  75 

assignment  of  fund  when,  100 

binding  only  when  delivered,  88 

body  of,  73 

cashing,  on  other  bank,  88e 

certification  of,  see  CERTIFICATION 

certified,  liability  of  bank  on,  125 

contract  contained  in,  65 

corporation,  78 

countermand  of,  99 

date,  67 

deposit  of,  in  bank  on  which  drawn,  112 

in  other  bank,  88e,  201 
debtor  need  not  accept,  118 
dishonor  of,  proceedings  on,  88b 

liability  for,  see  REFUSAL  TO  PAY 
deposited  for  collection,  201 

should  not  be  sent  direct  to  drawee,  95 
drawer  should  be  notified  when  not  paid,  94 
signature  of,  bank  guarantees,  138,  140 
drawn  when  no  funds,  98 

excuses  presentment,  91 

fraudulent  when,  194 
duplicate,  135 
essentials  of,  71 
for  less  than  one  dollar,  76 

more  than  deposit,  106 
form,  70 

gift  of,  see  GIFTS 
in  payment  of  gambling  debt,  39b 
knowledge  of  outstanding,  by  bank,  99,  103,  108 

post  dated,  98 

liability  for  refusal  to  pay,  see  REFUSAL  TO  PAY 
lost,  135 


W  (All  references  are  to  sections.) 

CHECK— Continued, 
memoranda  on,  72 
memorandum  check,  1316 
must  contain  name  of  payee,  71 
not  binding  until  delivered,  88 
number  on,  72 

outstanding,  bank  can  disregard,  108,  98 
paid,  137 
partnership,  81 
payable  after  date,  71 

out  of  particular  fund,  151 
on  demand,  62 
in  order  presented,  107 

payment  only  when  accepted  as  such,  89,  154 
post  dated,  98,  see  POST  DATED  CHECK 
presentment,  see  PRESENTMENT 
presumed  drawn  against  funds,  98 
promise  to  accept  in  future,  131 
protest  of,  see  PROTEST 
revocation  of,  by  countermand,  99 

by  death,  101 

by  insolvency,  102 
stale,  96-97 

stolen,  88  and  see  LOST  CHECK,  135 
surrender  of  when  paid,  137 

not  until  paid,  95 
transfer  of,  warrants,  by  delivery,  88b 

by  endorsement,  88b 

CLEARING  HOUSE  CERTIFICATE 
may  be  counted  as  reserve,  57 

COLLECTION 

deposit  for,  16,  201,  202 

CONDITIONAL  DEPOSIT,  see  DEPOSIT,  conditional 

CONTRACT 

between  bank  and  depositor,  3,  58 
made  by  drunken  person,  61 
infant,  59 

insane  person,  60,  61 
on  holiday,  6ga 
parties  to,  59 

COUNTERFEIT 

money  or  paper,  deposited,  14 

payment  in,  no 
COUNTERMAND 

bank  must  not  pay  after,  99 
check  subject  to,  99,  100 
cashier's,  looa 
when  certified,  I3ib 

DAMAGES 

see  REFUSAL  TO  PAY,  134 


(All  references  are  to  sections.) 

DATE 

alteration  in,  68 
check  without,  67 
of  check,  67 

disregarded  when,  103 

DEATH 

of  depositor,  177,  178 

duty  of  bank  upon,  179 
revokes  checks,  101 
joint  owner  of  deposit,  85 
partner,  81,  82 
DEBTOR 

banlf  is,  to  depositor,  3 
must  generally  seek  creditor,  43 
but  bank  need  not,  43,  64 

DELAY  in  presentment,  see  PRESENTMENT 

DELIVERY 

necessary  to  complete  contract,  88 

DEMAND 

check  is  payable  on,  62 

failure  of  bank  equivalent  to,  163 

not  necessary  when  bank  commits  wrong,  157 

should  be  made  before  statute  of  limitations  runs 

on  certificate  of  deposit,  46 

check,  general  deposit,  156 

payment  on  raised  check,  130 

DEPOSITOR 

bank  may  choose,  26 

terminate  relation  with,  26 
banks  as,  25 

bankruptcy  of,  see  BANKRUPTCY 
contract  between  bank  and,  58 
death  of,  see  DEATH 
government,  see  PUBLIC  MONEYS 
insolvency,  see  INSOLVENCY 
presumed  to  own  money  in  his  name,  39 
right  of,  to  examine  bank's  books,  38e 
status  of  on  failure  of  bank,  5,  and  see  INSOLVENCY 

DEPOSITS 

attachment  of,  see  ATTACHMENT,  also  GARNISHMENT 

bank,  25 

become  bank's  property,  I 

as  soon  as  passed  over  counter,  3 
by  check  on  same  bank,  112 

other  bank,  88e,  201,  202 

infant,  59 

joint  owners,  85 

officer,  see  PUBLIC  MONEYS 

postmasters,  32  and  PUBLIC  MONEYS 

one,  payable  to  another,  8 


VI  (All  references  are  to  sections.) 

DEPOSITS— Continued. 

(see)    administrator,   guardian,   husband   and   wife,   infant, 

insane,  trustee,  etc. 
classification  of,  2 
conditional,  3Qc 

cannot  be  paid  until  condition  fulfilled,  3Qc 

if  not  complied  with,  money  remains  depositor's,  3Qc 
but  compliance  gives  right  to  the  deposit,  39c 
as  general  depositor,  3Qc 
control  of  determines  ownership,  85 
distinction  between  loan  and,  50 
for  collection,  16,  201,  202 

special  purpose  of  depositor,  n 
general,  3 

may  be  changed  to  specific  or  special,  117 
gift  of,  see  GIFTS 
in  another's  name,  3Qa 
individual,  25 

interest  on,  see  INTEREST 
joint,  83 
keeping,  51 
loan,  when,  50 
loose  money,  3 
made  without  pass  book,  38c 
making,  37  et  seq. 
not  a  loan  when,  50 
of  decedent,  179 

infant,  179 

insolvent,  179 

insane,  179 

public  moneys,  see  PUBIC  MONEYS 
source  of,  39b 
received  after  banking  hours,  13 

when  bank  insolvent,  199 

where  kept  separate,  13,  16 
receiving,  when  bank  insolvent,  108 

by  national  bank  not  criminal,  199 

criminal  in  some  states,  198 

liability  of  officers  for,  199 

bank  must  be  hopelessly  insolvent,  201 
sealed  package  of  money 

may  be  special  deposit,  3 
slip,  see  DEPOSIT  SLIP 
special,  see  SPECIAL  DEPOSIT 
specific,  15 
state,  city  and  county  funds, 

see  PUBLIC  MONEYS 
to  whom  should  be  made,  37 
United  States,  see  PUBLIC  MONEYS 
where  made,  37 
who  entitled  to,  39 
DEPOSIT  SLIP 

deposit  made  without  binds  bank,  38a 


(All  references  are  to  sections.)  VII 

DEPOSIT  SUP— Continued, 
duplicate,  380 

not  negotiable,  380 
raising  constitutes  forgery,  38c 
should  always  be  required,  383 
DRAFT 

holder  of  a  general  creditor,  7 

unless  fraudulently  issued,  7 
not  payment  until  itself  paid,  in 
DRAWER  OF  CHECK,  see  CHECK,  DRAWER 
DRAWING  CHECK,  66 

DUPLICATE 

check,  135 

deposit  slip,  38c 
DUTY  OF  BANK 

only  to  pay,  100,  103,  109 

ENDORSEMENT,  65,  88a 
by  bank,  88e 

can  not  be  insisted  upon  when,  65 
certificate  of  deposit,  44 
in  blank,  65,  88a 

makes  instrument  payable  to  bearer,  88a 
restrictive,  88a 
signature  in,  88d 
special,  88a 

warranties  made  by,  88b,  141 
without  recourse,  88c 

ENTRY  IN  PASS  BOOK,  see  PASS  BOOK 
ERROR 

diligence  required  after  discovery  of,  38d 

evidence  can  be  introduced  to  show,  38a 

and  see  MISTAKE 
ESTATE 

representative  of,  see  179 
EXECUTOR 

act  of  one  binds  all,  86 

authority  of,  to  deposit,  36 

should  be  appointed  by  local  court,  180 

EXPRESS 

money  sent  by,  160 

FAILURE  OF  BANK,  see  INSOLVENCY 

FALSE  CERTIFICATION,  see  CERTIFICATION,  false,  1310 

FALSE  PRETENSES 

giving  worthless  check,  194 

FIVE  PER  CENT  REDEMPTION  FUND 

see-  RESERVE,  53 
FORGED 

check,  bank  cannot  charge  depositor  with,  138 
certification  of,  129 


VIII  (All  references  are  to  sections.) 

FO  RGED— Continued. 

paper,  deposited,  14,  112 

payment  in,  no 
FORGERY 

diligence  in  discovering,  146 

and  reporting,  38d 
gives  no  right  against  person  whose  name  forged,  88,  138 

but  he  may  adopt  the  signature,  145 
money  paid  on  may  be  recovered  when,  138,  139 
of  signature  of  drawer,  138-140 
endorser,  141 

on  certificate  of  deposit,  45 
of  bank  on  deposit  slip,  38c 
payment  on  is  no  payment,  142 
see  RAISED  CHECKS 
FRAUD 

in  concealing  mistake,  113 
issuing  check  where  no  funds,  194 

post  dated  check  is  not,  98 
FRAUDULENT  notes,  204 

GAMBLING 

debt,  check  for,  39b 
money  won  at,  396 

GARNISHMENT 

bank  subject  to,  147 

see  ATTACHMENT 
of  creditor  after  he  has  given  check,  154 

holder  of  check,  after  payment,  105 
what  is,  147 

GENERAL  DEPOSIT,  see  DEPOSIT,  general 
GIFT 

by  check  of  depositor,  190 

of  third  party,  193 
causa  mortis,  185 
in  contemplation  of  death,  185 
inter  vivos,  183 
of  deposit,  188,  189 
position  of  bank  regarding,  181 
to  save  administration,  I92a 
take  effect  immediately,  183 

in  future,  184 

validity  of  depends  upon  what  law,  187 
what  is,  182 

can  be  subject  of,  186 
courts  have  held,  191 

GOVERNMENT 

claim  of,  33 

deposits,  see  PUBLIC  MONEYS,  27 
GUARANTY 

national  bank  can  not  make,  129 


(All  references  are  to  sections.)  IX 

GUARDIAN 

authority  of  to  deposit,  36 

should  be  appointed  by  local  court,  179 
HOLIDAY,  contract  made  on,  6ga 

instrument  due  on,  67 
HUSBAND  AND  WIFE 

deposit  of,  84 

gifts  between,  see  GIFTS 
IDENTIFICATION 

bank  must  make,  139 
INFANT 

deposit  by,  59;  and  see  179,  180 
INJUNCTION 

against  national  bank,  153 

INQUIRIES 

answering,  i3ia 

regarding  certified  check,  131 

depositor's  account,  386 
no  part  of  bank's  duty,  109 
INSANE  PERSON 
contract  of,  60 
deposit  by,  60,  see  179,  180 

INSOLVENCY 

checks  revoked  by,  102 

of  bank,  equivalent  to  demand  and  refusal,  163 

loss  upon  check  on,  89 

renders  depositor  creditor  of  bank,  4  et  seq. 

INSOLVENT 

receiving  deposits  when,  198,  see  DEPOSITS,  receiving 
right  to  offset  against,  see  SET  OFF 

INTEREST 

due  from  time  of  demand,  163 

none  payable  unless  contracted  for,  163 

on  certificate  of  deposit,  49 

general  deposit,  163 

overdraft,  196 

public  moneys  of  U.  S.,  31 
when  bank  fails,  163 

commits  wrong,  164 

JOINT  DEPOSITS,  83 

LAWFUL  MONEY  RESERVE,  see  RESERVE 

LEGAL  TENDER 

payment  must  be  in,  no 
what  is,  203 

LIABILITY  OF  BANK 

does  not  attach  until  deposit  received    161 
on  certified  check,  see  CERTIFICATION 

certificate  of  deposit,  see  CERTIFICATE  of  DEPOSIT 


X  (All  references  are  to  sections.) 

LIABILITY  OF  BANK— Continued, 
check,  see  CHECKS 
deposits,  see  DEPOSITS 

not  limited  in  amount,  Sob 
refusal  to  pay  check,  see  REFUSAL  TO  PAY 
special  deposit,  20 

LIEN  AND  SET  OFF,  see  also  SET  OFF 
attaches  when  debt  is  due,  166,  170 
bank  entitled  to  when,  165 
of  U.  S.  on  circulating  notes,  33 
on  collections,  166 

notes  presented  for  discount,  168 
securities  obtained  for  special  purpose,  167 
in  regular  course  of  business,  165 
pledged  as  collateral,  167 
special  deposit,  167 
right  to  attaches  when,  170 
in  some  states  under  contract  only,  170 

not  until  notice  given,  170 
what  may  be  subject  to,  171 

LIMITATIONS,  see  STATUTE  OF  LIMITATIONS 
LOAN 

distinguished  from  deposit,  50 

when  statute  prohibiting  does  not  prevent  deposit,  50 

LOSS 

on  account  of  failure  to  present  check,  89,  91,  93 

failure  of  bank,  see  INSOLVENCY 
LOST 

certificate  of  deposit,  45 
check,  135 

duplicate  issued  for,  135 

rights  and  liabilities  under,  135 
payable  to  bearer  or  endorsed,  136 
when  not,  1363 

MAIL 

deposit  made  by,  161 

remittance  made  by,  160,  162 
MARRIED  WOMAN 

can  contract  in  most  states,  59 
MEMORANDUM  CHECK,  1316 

MISTAKE 

by-law  can  not  bind  depositor  to,  38a 
can  not  be  claimed  when,  116 
fraud  or  concealment  of,  113 
in  crediting  item,  114,  3&a 
making  payment,  113 

can  be  recovered  when,  113 
not  when  mistake  of  law,  117 
not  presumed,  117 
of  post  dated  check,  115 
money  paid  by,  113,  117 


(All  references  are  to  sections.)  XI 

MISTAKE— Continued. 

question  of  fact  whether  there  has  been,  117 

should  be  promptly  reported,  38d 

when  checkholder  should  have  discovered,  117 
MONEY 

counterfeit  is  no  payment,  no 

debtor  entitled  to  receive  in  payment,  118 

fraudulent  notes,  204 

legal  tender,  203 
MONEY  ORDER  FUNDS,  34 
NAME,  see  SIGNATURE 

in  which  deposit  stands,  see  DEPOSITS 
endorsement,  see  SIGNATURE 

NATIONAL  BANK 

depositors  in,  general  creditors,  4 

false  certification  of  check  by,  131 

may  become  public  depositary,  see  PUBLIC  MONEYS 
NEGOTIABLE  INSTRUMENT 

certificate  of  deposit  is  when,  41 

deposit  slip  is  not,  38c 

pass  book  is  not,  38b 

NOTE  PAYABLE  AT  BANK 

equivalent  to  order  to  bank  to  pay,  173 

NOTICE 

of  refusal  to  pay  check,  94,  see  REFUSAL  TO  PAY 
NUMBER  ON  CHECK,  72,  see  CHECKS 

OFFICER 

deposit  of,  see  DEPOSITS  and  PUBLIC  MONEYS 
OFFSET,  see  SET  OFF 

ORDER 

to  pay  deposit,  form  of,  63 
may  be  verbal,  63 
should  be  in  writing,  63 

and  see  CHECKS 
OVERDRAFT 

bank  under  no  duty  to  allow,  195 

though  it  has  previously  done  so,  107 

care  in  allowing,  197 

deposit  made  after  may  be  applied  in  payment,  196 

drawer  liable  to  bank  on,  196 

interest  on,  196 

is  loan  payable  on  demand,  196 

justified  when,  195 

may  be  criminal,  197 

note  given  in  payment  of  valid,  196 
OWNERSHIP  OF  DEPOSIT 

see  DEPOSIT,  who  entitled  to,  39 
PARTNERSHIP 

death  of  partner  dissolves,  82 


XII  (All  references  are  to  sections.) 

PARTNERSHIP— Continued. 

each  partner  in  is  agent  for  all,  81 
has  authority  to  draw  checks,  81 
in  name  of  partnership,  81 
not  for  individual  debt,  81 
funds  of,  81 

surviving  partner  of  has  authority  to  withdraw,  82 
PASS  BOOK 

balance  and  return  of,  38d 

diligence  in  discovering  error  upon,  38d 
deposit  made  without,  38c 
entries  in,  38 

evidence  only,  38a 
not  binding  when,  38a 
is  not  negotiable,  38b 

PAYEE 

the  one  to  whom  check  is  payable 

must  be  named  in  check,  71 
PAYMENT 

certificate  of  deposit  is,  when,  4Qa 

check  is  not  until  itself  paid,  89,  154 

but  is  payment  to  bank  on  which  drawn,  154 

draft  is  not  until  paid,  in 

money  only  need  be  accepted  in,  118 

PAYMENT  OF  CHECKS,  103 
by  draft,  in 

mistake,  113,  and  see  MISTAKE 
can  be  required  at  bank  only,  62 
completed  when  money  passed  over  counter,  105 
drawn  by  one  holding  power  of  attorney,  79 
duty  of  bank  to  make,  103  et  seq. 
for  more  than  deposit,  106,  107 
in  forged  or  counterfeit  paper,  no 
made  by  bank  at  its  peril,  87a 
must  be  in  legal  tender,  no 

in  order  checks  are  presented,  103,  107 
of  deceased  depositor,  see  DEATH  of  depositor 

DRUNKEN,   INSANE,   INSOLVENT  persons, 

see  these  titles  and  CHECKS 
on  forgery,  see  FORGERY 
post  dated,  115 
raised,  142 

refusal  to  make,  see  REFUSAL  TO  PAY 
to  wrong  person,  116,  117,  142 

deemed  acceptance  by  bank  when,  132 
wrongful,  makes  bank  liable  to  depositor,  117,  143 

usually  gives  holder  no  right  against  bank,  143 
PAYMENT  OF  DEPOSITS 

after  death  of  depositor,  see  DEATH 
agreement  regarding  controls,  85 
bank  makes  at  its  peril,  85 
must  be  on  order  of  owner  only,  39 


(All  references  are  to  sections.)  XIII 

PAYMENT  OF  DEPOSITS— Continued, 
order  for,  see  ORDER 

usually  by  check,  see  CHECKS 
POSTMASTER,  deposit  by,  see  PUBLIC  MONEYS 
POST  DATED  CHECK 

can  not  be  certified,  98,  122 

paid  before  its  date,  69,  98 
change  in  date  of,  69 
is  valid,  69,  98 
POWER  OF  ATTORNEY 
payment  of  checks  on,  79 
to  draw  deposit  of  another,  80 

deposit  does  not  authorize  withdrawal,  80 
written  should  be  required,  80 

PREFERENCE 

in  bankruptcy,  see  BANKRUPTCY 

PRESENTMENT 

certificate  of  deposit,  47 
check,  89 
delay  in,  89,  91 

excused  when,  93a 
throws  loss  upon  whom,  91-93 
excused  when,  91,  93b 
failure  to  make,  91,  92 
must  be  made  at  bank,  89 
during  banking  hours,  89 
within  reasonable  time,  89 
of  more  than  one  check  at  a  time,  107 
should  always  be  made  promptly 
what  is  reasonable  time  for,  90,  92 

when  collected  through  clearing  house,  90 
holder  knows  bank  is  failing,  90 
negotiated,  92 

when  drawer  loses  nothing,  93 
PROTEST 

not  necessary,  88b 

except  where  check  drawn  in  another  state,  88b 
when  payee  is  refused  payment,  94 
usually  made  however,  94 
PUBLIC  DEPOSITARY 

see  PUBLIC  MONEYS 
PUBLIC  MONEYS 
deposits  of,  27 

authority  of  officer  to  make,  10,  27 

of  bank  to  receive,  27 
how  kept,  27 
liability  of  bank  for,  10,  27,  27b 

when  unauthorized,  27b 
of  officer  making,  10,  27 
officer  may  make  when,  27,  27b,  50 
should  always  be  carried  as  such,  27a 


XIV  (All  references  are  to  sections.) 

PUBLIC  MONEYS— Continued, 
government  a  creditor  for,  10 

unless  wrongfully  deposited,  27 
of  City,  County  and  State,  27 

national  bank  may  receive  when,  28 
of  the  United  States,  29 

application  to  become  public  depositary,  30 
banks  must  pay  interest  on  deposits  of,  31 
deposits  of,  how  kept,  30 

unauthorized,  35 
penalty  for,  35 
by  certain  postmasters,  32 
at  postmaster's  risk,  33 
do  not  give  government  preference,  33 
unauthorized  receipt  of,  353 
security  required  for,  29 
statutes  relating  to  should  be  carefully  followed,  27 

of  the  United  States  relating  to,  27  et  seq. 
RAISED  CHECK 
certified,  130,  13  ib 

money  paid  on  can  be  recovered,  130,  142 
depositor  can  not  be  charged  with  payment  of,  I3ib,  142 
RECEIVING  DEPOSITS 

see  DEPOSITS,  receiving 
RECEIVER 

account  of,  36 

should  be  appointed  by  local  court,  179 

REFUSAL  TO   PAY  CHECK   (same  rules  apply  to  any  proper 

order) 

damages  against  bank  for,  134 
justified  when  not  sufficient  funds,  106 

by  reason  of  setoff  against  debt,  133,  170 
attachment  of  deposit,  133 
items  charged  back,  134 

though  books  show  otherwise,  38a,  170 
liability  of  bank  for,  132 
to  depositor,   133 
holder  of  check,  132 

conditional  upon  presentment  and  actual  refusal,  134 
notice  of  should  be  given,  94,  and  see  PROTEST 
qualified,  134 

who  liable  for  loss  upon,  see  PRESENTMENT,  89 
RELATION  OF  BANK  TO  DEPOSITOR,  i,  3 
REMITTANCE 

by  express,  mail,  etc.,  160 
REPRESENTATIVE  OF  ESTATE,  179,  180 
RESERVE,  51 
agent,  56 
city,  55 

central,  55 
purpose  of,  51 


(All  references  are  to  sections.)  XV 

RESERVE— Continued. 

required  by  national  banks,  52 
in  reserve  cities,  52,  55 

central  reserve  cities,  52,  55 
all  other  banks,  52 
none  against  circulating  notes,  53 

public  moneys  on  deposit,  54 
what  may  be  counted  as,  55,  57 
by  reserve  city  banks,  55 

central  reserve  city  banks,  56 
RESERVE  CITY,  see  RESERVE 
REVOCATION,  see  CHECK,  revocation  of 

SET  OFF  and  see  LIEN 

against  claim  acquired  after  insolvency,  174 
allowed  against  owner  of  deposit  only,  I7ia 
cannot  be  made  before  debt  is  due,  I73a 
in  case  of  insolvency  of  bank,  175 

depositor,  172 

bankruptcy  of  depositor,  175 
may  be  waived,  176 
of  deposit  balance,  165 

of  partnership  against  individual  debt,  I7ia 
public  officer,  33 

who  has  settled  his  accounts,  27 
proceeds  of  collection,  166 
what  is,  169 
see  NOTE  PAYABLE  AT  BANK 

SIGNATURE,  77 

may  be  made  by  pencil,  77 
stamp,  77 
printed,  77 
of  corporation,  78 

depositor,  bank  must  know,  138 
guaranties,  140 
record  of  should  be  kept,  87a 
who  can  not  write,  77 
drawer  not  guaranteed 

when  cashing  check  on  other  bank,  88e 
endorser  not  guaranteed  by  bank,  141 
prior  party  guaranteed  by  endorsement  when,  141 
power  of  attorney  to  make,  79 
should  be  made  how,  88d 
unauthorized,  see  FORGERY 

SPECIAL  DEPOSIT,  18 

agreement  should  be  made  regarding,  23 
care  required  of  bank  in  keeping,  20 

without  compensation,  20 
liability  of  bank  for,  20 
may  be  changed  to  general  or  specific,  17 
not  assets  of  bank,  22 
power  of  bank  to  receive,  19 
returning,  21 


XVI  (All  references  are  to  sections.) 

SPECIAL  DEPOSIT— Continued, 
what  is  not,  5,  II 

may  be  subject  of,  24 
when  is  deposit  special,  23 
SPECIFIC  DEPOSIT,  15 

can  be  used  for  specific  purpose  only,  15 
remains  property  of  depositor,  16 
recovery  can  be  had  when,  16 
what  is,  15 

STALE  CHECK,  96,  97 
STATUTE  OF  LIMITATIONS 
begins  to  run  when,  155 
on  certificate  of  deposit,  46 
certified  check,  128 
deposit,  156 

unpaid  check  against  drawer,  158 
refusal  of  bank  to  pay,  156 
wrong  committed  by  bank,   157 
what  is,  156 
STOLEN 

certificate  of  deposit,  see  45  and  88 
check,  88 
deposit,  13 

money  received  on  deposit,  3Qb 
SUIT 

demand  should  be  made  before,  156,  see  DEMAND 
SUM  PAYABLE,  74 
SUNDAY,  see  67 

TRUSTEE 

account  as,  9 

how  kept,  36 
one  can  not  make  contract  for  several,  87 

TRUST  FUNDS,  36,  39b 

tracing,  200 
UNITED  STATES 

not  a  preferred  creditor  on  deposits,  33 

statutes  of  are  given  under  proper  headings 

VERBAL 

certification  of  check,  see  CERTIFICATION 

order  to  pay  deposits,  see  ORDER 
WORTHLESS  CHECK,  194 
WRITING 

in  body  of  check,  73 

not  guaranteed  by  bank,  142 

order  for  payment  of  deposit  should  be  in,  63 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


MAR  27  1938 


LD  21-95m-7,'37 


YB   18145 


' 

A  <P[ 


4 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


